Columbia Variable
Portfolio – Long Government/Credit Bond Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
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| 32 |
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which Columbia Variable Portfolio – Long Government/Credit Bond Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of
Additional Information (SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at
sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available
without charge by visiting columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT, and for reporting periods ended prior to March 31, 2019, on Form N-Q. The Fund’s Form N-Q and Form N-PORT
filings are available on the SEC’s website at sec.gov. The Fund’s complete schedule of portfolio holdings, as filed on Form N-Q or Form N-PORT, can also be obtained without charge, upon request, by calling
800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
225 Franklin Street
Boston, MA 02110
Fund distributor
Columbia Management Investment Distributors,
Inc.
225 Franklin Street
Boston, MA 02110
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Columbia Variable Portfolio – Long
Government/Credit Bond Fund | Semiannual Report 2020
Fund at a Glance
(Unaudited)
(Unaudited)
Investment objective
The Fund
seeks total return, consisting of current income and capital appreciation.
Portfolio management
Tom Murphy, CFA
Lead Portfolio Manager
Managed Fund since 2017
Royce D. Wilson, CFA
Portfolio Manager
Managed Fund since February 2020
John Dawson, CFA
Portfolio Manager
Managed Fund since February 2020
| Columbia Variable Portfolio – Long Government/Credit Bond Fund | Semiannual Report 2020 | 3 |
Fund at a Glance (continued)
(Unaudited)
(Unaudited)
| 4 | Columbia Variable Portfolio – Long Government/Credit Bond Fund | Semiannual Report 2020 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount 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 $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
| January 1, 2020 — June 30, 2020 | |||||||
| Account value at the beginning of the period ($) | Account value at the end of the period ($) | Expenses paid during the period ($) | Fund’s annualized expense ratio (%) | ||||
| Actual | Hypothetical | Actual | Hypothetical | Actual | Hypothetical | Actual | |
| Class 1 | 1,000.00 | 1,000.00 | 1,139.20 | 1,022.38 | 2.66 | 2.51 | 0.50 |
| Class 2 | 1,000.00 | 1,000.00 | 1,138.80 | 1,021.13 | 3.99 | 3.77 | 0.75 |
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 366.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
| Columbia Variable Portfolio – Long Government/Credit Bond Fund | Semiannual Report 2020 | 5 |
Portfolio of Investments
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 6 | Columbia Variable Portfolio – Long Government/Credit Bond Fund | Semiannual Report 2020 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Long Government/Credit Bond Fund | Semiannual Report 2020 | 7 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 8 | Columbia Variable Portfolio – Long Government/Credit Bond Fund | Semiannual Report 2020 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Long Government/Credit Bond Fund | Semiannual Report 2020 | 9 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
At June 30, 2020,
securities and/or cash totaling $715,485 were pledged as collateral.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 10 | Columbia Variable Portfolio – Long Government/Credit Bond Fund | Semiannual Report 2020 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Investments in derivatives
| Long futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| U.S. Long Bond | 227 | 09/2020 | USD | 40,533,688 | 96,018 | — |
| U.S. Ultra Bond 10-Year Note | 115 | 09/2020 | USD | 18,110,703 | 138,054 | — |
| Total | 234,072 | — | ||||
| Short futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| U.S. Treasury 10-Year Note | (349) | 09/2020 | USD | (48,570,984) | — | (123,803) |
| U.S. Ultra Treasury Bond | (69) | 09/2020 | USD | (15,052,781) | — | (291,314) |
| Total | — | (415,117) | ||||
Notes to Portfolio of
Investments
| (a) | Represents privately placed and other securities and instruments exempt from Securities and Exchange Commission registration (collectively, private placements), such as Section 4(a)(2) and Rule 144A eligible securities, which are often sold only to qualified institutional buyers. At June 30, 2020, the total value of these securities amounted to $116,348,775, which represents 6.65% of total net assets. |
| (b) | Represents a variable rate security with a step coupon where the rate adjusts according to a schedule for a series of periods, typically lower for an initial period and then increasing to a higher coupon rate thereafter. The interest rate shown was the current rate as of June 30, 2020. |
| (c) | Principal and interest may not be guaranteed by a governmental entity. |
| (d) | This security or a portion of this security has been pledged as collateral in connection with derivative contracts. |
| (e) | Zero coupon bond. |
| (f) | The rate shown is the seven-day current annualized yield at June 30, 2020. |
| (g) | As defined in the Investment Company Act of 1940, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the period ended June 30, 2020 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.253% | ||||||||
| 61,434,341 | 248,752,917 | (305,641,987) | 2,274 | 4,547,545 | 9,992 | 372,227 | 4,547,545 | |
Abbreviation Legend
| STRIPS | Separate Trading of Registered Interest and Principal Securities |
Currency Legend
| USD | US Dollar |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Long Government/Credit Bond Fund | Semiannual Report 2020 | 11 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Fair value measurements (continued)
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at June 30, 2020:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Asset-Backed Securities — Agency | — | 19,658,275 | — | 19,658,275 |
| Corporate Bonds & Notes | — | 946,596,836 | — | 946,596,836 |
| Foreign Government Obligations | — | 11,316,455 | — | 11,316,455 |
| U.S. Treasury Obligations | 700,743,218 | 54,643,779 | — | 755,386,997 |
| Money Market Funds | 4,547,545 | — | — | 4,547,545 |
| Total Investments in Securities | 705,290,763 | 1,032,215,345 | — | 1,737,506,108 |
| Investments in Derivatives | ||||
| Asset | ||||
| Futures Contracts | 234,072 | — | — | 234,072 |
| Liability | ||||
| Futures Contracts | (415,117) | — | — | (415,117) |
| Total | 705,109,718 | 1,032,215,345 | — | 1,737,325,063 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The Fund’s assets assigned to
the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical
assets.
Derivative instruments are valued at
unrealized appreciation (depreciation).
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 12 | Columbia Variable Portfolio – Long Government/Credit Bond Fund | Semiannual Report 2020 |
Statement of Assets and Liabilities
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $1,449,694,699) | $1,732,958,563 |
| Affiliated issuers (cost $4,545,271) | 4,547,545 |
| Receivable for: | |
| Capital shares sold | 81,227 |
| Dividends | 5,899 |
| Interest | 12,802,766 |
| Foreign tax reclaims | 35,708 |
| Variation margin for futures contracts | 123,149 |
| Prepaid expenses | 1 |
| Trustees’ deferred compensation plan | 94,764 |
| Total assets | 1,750,649,622 |
| Liabilities | |
| Payable for: | |
| Capital shares purchased | 1,769,481 |
| Variation margin for futures contracts | 133,477 |
| Management services fees | 23,459 |
| Distribution and/or service fees | 161 |
| Service fees | 648 |
| Compensation of board members | 4,073 |
| Compensation of chief compliance officer | 150 |
| Other expenses | 24,680 |
| Trustees’ deferred compensation plan | 94,764 |
| Total liabilities | 2,050,893 |
| Net assets applicable to outstanding capital stock | $1,748,598,729 |
| Represented by | |
| Paid in capital | 1,334,365,216 |
| Total distributable earnings (loss) | 414,233,513 |
| Total - representing net assets applicable to outstanding capital stock | $1,748,598,729 |
| Class 1 | |
| Net assets | $1,725,091,483 |
| Shares outstanding | 137,780,438 |
| Net asset value per share | $12.52 |
| Class 2 | |
| Net assets | $23,507,246 |
| Shares outstanding | 1,885,133 |
| Net asset value per share | $12.47 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Long Government/Credit Bond Fund | Semiannual Report 2020 | 13 |
Statement of Operations
Six Months Ended June 30, 2020 (Unaudited)
Six Months Ended June 30, 2020 (Unaudited)
| Net investment income | |
| Income: | |
| Dividends — affiliated issuers | $372,227 |
| Interest | 25,006,822 |
| Interfund lending | 118 |
| Total income | 25,379,167 |
| Expenses: | |
| Management services fees | 4,188,400 |
| Distribution and/or service fees | |
| Class 2 | 24,564 |
| Service fees | 5,507 |
| Compensation of board members | 17,589 |
| Custodian fees | 6,119 |
| Printing and postage fees | 5,172 |
| Audit fees | 19,642 |
| Legal fees | 20,976 |
| Compensation of chief compliance officer | 294 |
| Other | 19,990 |
| Total expenses | 4,308,253 |
| Net investment income | 21,070,914 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 29,439,216 |
| Investments — affiliated issuers | 9,992 |
| Futures contracts | 17,380,048 |
| Net realized gain | 46,829,256 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | 152,860,227 |
| Investments — affiliated issuers | 2,274 |
| Futures contracts | 2,847,557 |
| Net change in unrealized appreciation (depreciation) | 155,710,058 |
| Net realized and unrealized gain | 202,539,314 |
| Net increase in net assets resulting from operations | $223,610,228 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 14 | Columbia Variable Portfolio – Long Government/Credit Bond Fund | Semiannual Report 2020 |
Statement of Changes in Net Assets
| Six Months Ended June 30, 2020 (Unaudited) | Year Ended December 31, 2019 | |
| Operations | ||
| Net investment income | $21,070,914 | $45,787,560 |
| Net realized gain | 46,829,256 | 42,806,326 |
| Net change in unrealized appreciation (depreciation) | 155,710,058 | 188,344,624 |
| Net increase in net assets resulting from operations | 223,610,228 | 276,938,510 |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class 1 | — | (43,558,568) |
| Class 2 | — | (352,059) |
| Total distributions to shareholders | — | (43,910,627) |
| Decrease in net assets from capital stock activity | (98,355,178) | (34,041,963) |
| Total increase in net assets | 125,255,050 | 198,985,920 |
| Net assets at beginning of period | 1,623,343,679 | 1,424,357,759 |
| Net assets at end of period | $1,748,598,729 | $1,623,343,679 |
| Six Months Ended | Year Ended | |||
| June 30, 2020 (Unaudited) | December 31, 2019 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 1,536,543 | 17,689,948 | 2,085,164 | 21,680,904 |
| Distributions reinvested | — | — | 4,180,285 | 43,558,568 |
| Redemptions | (10,057,955) | (120,891,643) | (9,611,724) | (101,225,037) |
| Net decrease | (8,521,412) | (103,201,695) | (3,346,275) | (35,985,565) |
| Class 2 | ||||
| Subscriptions | 526,928 | 6,254,902 | 369,821 | 3,918,512 |
| Distributions reinvested | — | — | 33,819 | 352,059 |
| Redemptions | (119,920) | (1,408,385) | (228,212) | (2,326,969) |
| Net increase | 407,008 | 4,846,517 | 175,428 | 1,943,602 |
| Total net decrease | (8,114,404) | (98,355,178) | (3,170,847) | (34,041,963) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Long Government/Credit Bond Fund | Semiannual Report 2020 | 15 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income | Net realized and unrealized gain (loss) | Total from investment operations | Distributions from net investment income | Distributions from net realized gains | Total distributions to shareholders | |
| Class 1 | |||||||
| Six Months Ended 6/30/2020 (Unaudited) | $10.99 | 0.15 | 1.38 | 1.53 | — | — | — |
| Year Ended 12/31/2019 | $9.44 | 0.31 | 1.54 | 1.85 | (0.30) | — | (0.30) |
| Year Ended 12/31/2018 | $10.63 | 0.31 | (0.85) | (0.54) | (0.35) | (0.30) | (0.65) |
| Year Ended 12/31/2017 | $9.92 | 0.34 | 0.77 | 1.11 | (0.36) | (0.04) | (0.40) |
| Year Ended 12/31/2016 | $9.81 | 0.30 | 0.01 | 0.31 | (0.20) | — | (0.20) |
| Year Ended 12/31/2015 | $10.02 | 0.21 | (0.22) | (0.01) | (0.20) | — | (0.20) |
| Class 2 | |||||||
| Six Months Ended 6/30/2020 (Unaudited) | $10.95 | 0.13 | 1.39 | 1.52 | — | — | — |
| Year Ended 12/31/2019 | $9.41 | 0.28 | 1.53 | 1.81 | (0.27) | — | (0.27) |
| Year Ended 12/31/2018 | $10.60 | 0.28 | (0.85) | (0.57) | (0.32) | (0.30) | (0.62) |
| Year Ended 12/31/2017 | $9.90 | 0.31 | 0.76 | 1.07 | (0.33) | (0.04) | (0.37) |
| Year Ended 12/31/2016 | $9.79 | 0.28 | 0.00(d) | 0.28 | (0.17) | — | (0.17) |
| Year Ended 12/31/2015 | $9.99 | 0.18 | (0.20) | (0.02) | (0.18) | — | (0.18) |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Annualized. |
| (d) | Rounds to zero. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 16 | Columbia Variable Portfolio – Long Government/Credit Bond Fund | Semiannual Report 2020 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Six Months Ended 6/30/2020 (Unaudited) | $12.52 | 13.92% | 0.50%(c) | 0.50%(c) | 2.47%(c) | 29% | $1,725,091 |
| Year Ended 12/31/2019 | $10.99 | 19.74% | 0.50% | 0.50% | 2.94% | 49% | $1,607,152 |
| Year Ended 12/31/2018 | $9.44 | (5.11%) | 0.51% | 0.51% | 3.13% | 80% | $1,412,097 |
| Year Ended 12/31/2017 | $10.63 | 11.35% | 0.54% | 0.54% | 3.32% | 161% | $1,434,026 |
| Year Ended 12/31/2016 | $9.92 | 3.02% | 0.57% | 0.56% | 2.96% | 394% | $1,464,843 |
| Year Ended 12/31/2015 | $9.81 | (0.07%) | 0.57% | 0.56% | 2.09% | 414% | $1,483,185 |
| Class 2 | |||||||
| Six Months Ended 6/30/2020 (Unaudited) | $12.47 | 13.88% | 0.75%(c) | 0.75%(c) | 2.21%(c) | 29% | $23,507 |
| Year Ended 12/31/2019 | $10.95 | 19.42% | 0.75% | 0.75% | 2.68% | 49% | $16,192 |
| Year Ended 12/31/2018 | $9.41 | (5.37%) | 0.76% | 0.76% | 2.87% | 80% | $12,261 |
| Year Ended 12/31/2017 | $10.60 | 10.99% | 0.79% | 0.79% | 3.07% | 161% | $16,156 |
| Year Ended 12/31/2016 | $9.90 | 2.78% | 0.82% | 0.81% | 2.73% | 394% | $17,042 |
| Year Ended 12/31/2015 | $9.79 | (0.22%) | 0.82% | 0.81% | 1.86% | 414% | $12,641 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Long Government/Credit Bond Fund | Semiannual Report 2020 | 17 |
Notes to Financial Statements
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Note 1. Organization
Columbia Variable Portfolio
– Long Government/Credit Bond Fund (the Fund), a series of Columbia Funds Variable Insurance Trust (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended
(the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1 and Class 2 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued by
affiliated and unaffiliated life insurance companies (Participating Insurance Companies) as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors (Qualified
Investors) authorized by Columbia Management Investment Distributors, Inc. (the Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by participating in a Qualified Plan or by
buying a Contract and making allocations to the Fund. Although all share classes generally have identical voting, dividend and liquidation rights, each share class votes separately when required by the Trust’s
organizational documents or by law. Different share classes pay different net investment income distribution amounts to the extent the expenses of such share classes differ, and distributions in liquidation will be
proportional to the net asset value of each share class. Each share class has its own cost structure and other features.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Debt securities generally are
valued by pricing services approved by the Board of Trustees based upon market transactions for normal, institutional-size trading units of similar securities. The services may use various pricing techniques that take
into account, as applicable, factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data, as well as approved independent broker-dealer quotes. Debt securities for
which quotations are not readily available or not believed to be reflective of market value may also be valued based upon a bid quote from an approved independent broker-dealer. Debt securities maturing in 60 days or
less are valued primarily at amortized cost value, unless this method results in a valuation that management believes does not approximate market value.
Asset- and mortgage-backed
securities are generally valued by pricing services, which utilize pricing models that incorporate the securities’ cash flow and loan performance data. These models also take into account available market data,
including trades, market quotations, and benchmark yield curves for identical or similar securities. Factors used to identify similar securities may include, but are not limited to, issuer, collateral type, vintage,
prepayment speeds, collateral performance, credit ratings, credit enhancement and expected life. Asset-backed securities for which quotations are readily available may also be valued based upon an over-the-counter or
exchange bid quote from an approved independent broker-dealer.
Investments in open-end investment
companies (other than ETFs), are valued at the latest net asset value reported by those companies as of the valuation time.
Futures and options on futures
contracts are valued based upon the settlement price at the close of regular trading on their principal exchanges or, in the absence of transactions, at the mean of the latest quoted bid and ask prices.
| 18 | Columbia Variable Portfolio – Long Government/Credit Bond Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Derivative instruments
The Fund invests in certain
derivative instruments, as detailed below, to meet its investment objectives. Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more securities,
currencies, commodities, indices, or other assets or instruments. Derivatives may be used to increase investment flexibility (including to maintain cash reserves while maintaining desired exposure to certain assets),
for risk management (hedging) purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain investment risks,
such as foreign currency exchange rate risk, interest rate risk and credit risk. Derivatives may involve various risks, including the potential inability of the counterparty to fulfill its obligations under the terms
of the contract, the potential for an illiquid secondary market (making it difficult for the Fund to sell or terminate, including at favorable prices) and the potential for market movements which may expose the Fund
to gains or losses in excess of the amount shown in the Statement of Assets and Liabilities. The notional amounts of derivative instruments, if applicable, are not recorded in the financial statements.
A derivative instrument may suffer
a marked-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform its
obligations under the contract. The Fund’s risk of loss from counterparty credit risk on over-the-counter derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by
the Fund and the amount of any variation margin held by the counterparty, plus any replacement costs or related amounts. With exchange-traded or centrally cleared derivatives, there is reduced counterparty credit risk
to the Fund since the clearinghouse or central counterparty (CCP) provides some protection in the case of clearing member default. The clearinghouse or CCP stands between the buyer and the seller of the contract;
therefore, additional counterparty credit risk is failure of the clearinghouse or CCP. However, credit risk still exists in exchange-traded or centrally cleared derivatives with respect to initial and variation margin
that is held in a broker’s customer account. While brokers are required to segregate customer margin from their own assets, in the event that a broker becomes insolvent or goes into bankruptcy and at that time
there is a shortfall in the aggregate amount of margin held by the broker for all its clients, U.S. bankruptcy laws will typically allocate that shortfall on a pro-rata basis across all the broker’s customers
(including the Fund), potentially resulting in losses to the Fund.
In order to better define its
contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement)
or similar agreement with its derivatives contract counterparties. An ISDA Master Agreement is an agreement between the Fund and a counterparty that governs over-the-counter derivatives and typically contains, among
other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset with the counterparty
certain derivative instrument’s payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment
in the event of default (close-out netting), including the bankruptcy or insolvency of the counterparty. Note, however, that bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or
prohibitions against the right of offset or netting in bankruptcy, insolvency or other events.
Collateral (margin) requirements
differ by type of derivative. Margin requirements are established by the clearinghouse or CCP for exchange-traded and centrally cleared derivatives. Brokers can ask for margin in excess of the minimum in certain
circumstances. Collateral terms are contract specific for over-the-counter derivatives. For over-the-counter derivatives traded
| Columbia Variable Portfolio – Long Government/Credit Bond Fund | Semiannual Report 2020 | 19 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
under an ISDA Master Agreement, the collateral
requirements are typically calculated by netting the marked-to-market amount for each transaction under such agreement and comparing that amount to the value of any variation margin currently pledged by the Fund
and/or the counterparty. Generally, the amount of collateral due from or to a party has to exceed a minimum transfer amount threshold (e.g., $250,000) before a transfer has to be made. To the extent amounts due to the
Fund from its counterparties are not fully collateralized, contractually or otherwise, the Fund bears the risk of loss from counterparty nonperformance. The Fund may also pay interest expense on cash collateral
received from the broker. Any interest expense paid by the Fund is shown on the Statement of Operations. The Fund attempts to mitigate counterparty risk by only entering into agreements with counterparties that it
believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties.
Certain ISDA Master Agreements
allow counterparties of over-the-counter derivatives transactions to terminate derivatives contracts prior to maturity in the event the Fund’s net asset value declines by a stated percentage over a specified
time period or if the Fund fails to meet certain terms of the ISDA Master Agreement, which would cause the Fund to accelerate payment of any net liability owed to the counterparty. The Fund also has termination rights
if the counterparty fails to meet certain terms of the ISDA Master Agreement. In determining whether to exercise such termination rights, the Fund would consider, in addition to counterparty credit risk, whether
termination would result in a net liability owed from the counterparty.
For financial reporting purposes,
the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statement of Assets and Liabilities.
Futures contracts
Futures contracts are
exchange-traded and represent commitments for the future purchase or sale of an asset at a specified price on a specified date. The Fund bought and sold futures contracts to manage the duration and yield curve
exposure of the Fund versus the benchmark and to manage exposure to movements in interest rates. These instruments may be used for other purposes in future periods. Upon entering into futures contracts, the Fund bears
risks that it may not achieve the anticipated benefits of the futures contracts and may realize a loss. Additional risks include counterparty credit risk, the possibility of an illiquid market, and that a change in
the value of the contract or option may not correlate with changes in the value of the underlying asset.
Upon entering into a futures
contract, the Fund deposits cash or securities with the broker, known as a futures commission merchant (FCM), in an amount sufficient to meet the initial margin requirement. The initial margin deposit must be
maintained at an established level over the life of the contract. Cash deposited as initial margin is recorded in the Statement of Assets and Liabilities as margin deposits. Securities deposited as initial margin are
designated in the Portfolio of Investments. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily change in the contract value and are
recorded as variation margin receivable or payable and are offset in unrealized gains or losses. The Fund recognizes a realized gain or loss when the contract is closed or expires. Futures contracts involve, to
varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities.
Effects of derivative transactions in
the financial statements
The following tables are intended
to provide additional information about the effect of derivatives on the financial statements of the Fund, including: the fair value of derivatives by risk category and the location of those fair values in the
Statement of Assets and Liabilities; and the impact of derivative transactions over the period in the Statement of Operations, including realized and unrealized gains (losses). The derivative instrument schedules
following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any.
The following table is a summary of
the fair value of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) at June 30, 2020:
| Asset derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Interest rate risk | Component of total distributable earnings (loss) — unrealized appreciation on futures contracts | 234,072* |
| 20 | Columbia Variable Portfolio – Long Government/Credit Bond Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
| Liability derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Interest rate risk | Component of total distributable earnings (loss) — unrealized depreciation on futures contracts | 415,117* |
| * | Includes cumulative appreciation (depreciation) as reported in the tables following the Portfolio of Investments. Only the current day’s variation margin is reported in receivables or payables in the Statement of Assets and Liabilities. |
The following table indicates the
effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) in the Statement of Operations for the six months ended June 30, 2020:
| Amount of realized gain (loss) on derivatives recognized in income | |
| Risk exposure category | Futures contracts ($) |
| Interest rate risk | 17,380,048 |
| Change in unrealized appreciation (depreciation) on derivatives recognized in income | |
| Risk exposure category | Futures contracts ($) |
| Interest rate risk | 2,847,557 |
The following table is a summary
of the average outstanding volume by derivative instrument for the six months ended June 30, 2020:
| Derivative instrument | Average notional amounts ($)* |
| Futures contracts — long | 99,941,414 |
| Futures contracts — short | 62,002,742 |
| * | Based on the ending quarterly outstanding amounts for the six months ended June 30, 2020. |
Asset- and mortgage-backed
securities
The Fund may invest in asset-backed
and mortgage-backed securities. The maturity dates shown represent the original maturity of the underlying obligation. Actual maturity may vary based upon prepayment activity on these obligations. All, or a portion,
of the obligation may be prepaid at any time because the underlying asset may be prepaid. As a result, decreasing market interest rates could result in an increased level of prepayment. An increased prepayment rate
will have the effect of shortening the maturity of the security. Unless otherwise noted, the coupon rates presented are fixed rates.
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Interest income is recorded on an
accrual basis. Market premiums and discounts, including original issue discounts, are amortized and accreted, respectively, over the expected life of the security on all debt securities, unless otherwise noted. The
Fund classifies gains and losses realized on prepayments received on mortgage-backed securities as adjustments to interest income.
The Fund may place a debt security
on non-accrual status and reduce related interest income when it becomes probable that the interest will not be collected and the amount of uncollectible interest can be reasonably estimated. A defaulted debt security
is removed from non-accrual status when the issuer resumes interest payments or when collectibility of interest is reasonably assured.
Dividend income is recorded on the
ex-dividend date.
| Columbia Variable Portfolio – Long Government/Credit Bond Fund | Semiannual Report 2020 | 21 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund intends to qualify each
year as a regulated investment company under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its investment company taxable income and net capital gain, if any, for its
tax year, and as such will not be subject to federal income taxes. In addition, because the Fund meets the exception under Internal Revenue Code Section 4982(f), the Fund expects not to be subject to federal excise
tax. Therefore, no federal income or excise tax provision is recorded.
Foreign taxes
The Fund may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable, based upon its current interpretation of tax rules
and regulations that exist in the markets in which it invests.
Realized gains in certain countries
may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The
amount, if any, is disclosed as a liability on the Statement of Assets and Liabilities.
Distributions to subaccounts
Distributions to the subaccounts of
Contracts, Qualified Plans and Qualified Investors are recorded at the close of business on the record date and are payable on the first business day following the record date. Dividends from net investment income, if
any, are declared and distributed annually. Capital gain distributions, when available, will be made annually. However, an additional capital gain distribution may be made during the fiscal year in order to comply
with the Internal Revenue Code, as applicable to registered investment companies. Income distributions and capital gain distributions are determined in accordance with federal income tax regulations, which may differ
from GAAP. All dividends and distributions are reinvested in additional shares of the applicable share class of the Fund at the net asset value as of the ex-dividend date of the distribution.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting
| 22 | Columbia Variable Portfolio – Long Government/Credit Bond Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
services. The management services fee is an annual
fee that is equal to a percentage of the Fund’s daily net assets that declines from 0.50% to 0.34% as the Fund’s net assets increase. The annualized effective management services fee rate for the six
months ended June 30, 2020 was 0.49% of the Fund’s average daily net assets.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. These members of the Board of Trustees
may participate in a Deferred Compensation Plan (the Deferred Plan) which may be terminated at any time. Obligations of the Deferred Plan will be paid solely out of the Fund’s assets, and all amounts payable
under the Deferred Plan constitute a general unsecured obligation of the Fund.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The annualized
effective service fee rate for the six months ended June 30, 2020, was 0.00% of the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. The Board of Trustees has approved, and the Fund has adopted, a distribution plan
(the Plan) which sets the distribution fees for the Fund. These fees are calculated daily and are intended to compensate the Distributor for selling shares of the Fund. The Fund pays a monthly distribution fee to the
Distributor at the maximum annual rate of 0.25% of the average daily net assets attributable to Class 2 shares of the Fund. The Fund pays no distribution and service fees for Class 1 shares.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft charges from the Fund’s
custodian, do not exceed the following annual rate(s) as a percentage of the class’ average daily net assets:
| Fee rate(s) contractual through April 30, 2021 | |
| Class 1 | 0.55% |
| Class 2 | 0.80 |
| Columbia Variable Portfolio – Long Government/Credit Bond Fund | Semiannual Report 2020 | 23 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and
brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program fees and expenses, transaction charges and interest on borrowed
money, interest, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This agreement may be modified or amended only with approval from
the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements described above are not recoverable by the Investment Manager or
its affiliates in future periods.
Note 4. Federal tax
information
The timing and character of
income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP because of temporary or permanent book to tax differences.
At June 30, 2020, the approximate
cost of all investments for federal income tax purposes and the aggregate gross approximate unrealized appreciation and depreciation based on that cost was:
| Federal tax cost ($) | Gross unrealized appreciation ($) | Gross unrealized (depreciation) ($) | Net unrealized appreciation ($) |
| 1,454,240,000 | 287,936,000 | (4,851,000) | 283,085,000 |
Tax cost of investments and
unrealized appreciation/(depreciation) may also include timing differences that do not constitute adjustments to tax basis.
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Note 5. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $481,876,541 and $480,746,285, respectively, for the six months ended June 30, 2020, of which $3,367,625 and
$26,840,591, respectively, were U.S. government securities. The amount of purchase and sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 6. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes referred to
as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 7. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
| 24 | Columbia Variable Portfolio – Long Government/Credit Bond Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund’s activity in the
Interfund Program during the six months ended June 30, 2020 was as follows:
| Borrower or lender | Average loan balance ($) | Weighted average interest rate (%) | Number of days with outstanding loans |
| Lender | 1,000,000 | 0.85 | 5 |
Interest income earned by the Fund
is recorded as Interfund lending in the Statement of Operations. The Fund had no outstanding interfund loans at June 30, 2020.
Note 8. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by Citibank, N.A., HSBC Bank USA, N.A. and JPMorgan Chase Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. The credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment Manager or an affiliated investment manager, severally and
not jointly, permits collective borrowings up to $1 billion. Interest is charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the
one-month LIBOR rate and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a
commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The commitment fee is included in other expenses in the Statement of Operations. This agreement
expires annually in December unless extended or renewed.
The Fund had no borrowings during
the six months ended June 30, 2020.
Note 9. Significant
risks
Credit risk
Credit risk is the risk that the
value of debt instruments in the Fund’s portfolio may decline because the issuer defaults or otherwise becomes unable or unwilling, or is perceived to be unable or unwilling, to honor its financial obligations,
such as making payments to the Fund when due. Credit rating agencies assign credit ratings to certain debt instruments to indicate their credit risk. Lower rated or unrated debt instruments held by the Fund may
present increased credit risk as compared to higher-rated debt instruments.
Interest rate risk
Interest rate risk is the risk of
losses attributable to changes in interest rates. In general, if prevailing interest rates rise, the values of debt securities tend to fall, and if interest rates fall, the values of debt securities tend to rise.
Actions by governments and central banking authorities can result in increases in interest rates. Increasing interest rates may negatively affect the value of debt securities held by the Fund, resulting in a negative
impact on the Fund’s performance and net asset value per share. In general, the longer the maturity or duration of a debt security, the greater its sensitivity to changes in interest rates. The Fund is subject
to the risk that the income generated by its investments may not keep pace with inflation.
Liquidity risk
Liquidity risk is the risk
associated with a lack of marketability of investments which may make it difficult to sell the investment at a desirable time or price. Changing regulatory, market or other conditions or environments (for example, the
interest rate or credit environments) may adversely affect the liquidity of the Fund’s investments. The Fund may have to accept a lower selling price for the holding, sell other investments, or forego another,
more appealing investment opportunity. Generally, the less liquid the market at the time the Fund sells a portfolio investment, the greater the risk of loss or decline of value to the Fund. A less liquid market can
lead to an increase in Fund redemptions, which may negatively impact Fund performance and net asset value per share, including, for example, if the Fund is forced to sell securities in a down market.
| Columbia Variable Portfolio – Long Government/Credit Bond Fund | Semiannual Report 2020 | 25 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Market and environment risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The Fund performance may also be
significantly negatively impacted by the economic impact of the coronavirus disease 2019 (COVID-19) pandemic. Public health crisis has become a pandemic that has resulted in, and may continue to result in, significant
global economic and societal disruption and market volatility due to disruptions in market access, resource availability, facilities operations, imposition of tariffs, export controls and supply chain disruption,
among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement and loss in human and other resources. The uncertainty surrounding the magnitude, duration,
reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as
the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and pandemics that may arise in the future – could negatively affect global economies and markets
in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in emerging market countries may be greater due to generally less established healthcare systems,
governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The disruptions caused
by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively impact the Fund’s ability to achieve their investment objectives. Any such event(s) could
have a significant adverse impact on the value and risk profile of the Fund.
The Investment Manager and its
affiliates have systematically implemented strategies to address the operating environment spurred by the COVID-19 pandemic. To promote the safety and security of our employees and to assure the continuity of our
business operations, we have implemented a work from home protocol for virtually all of our employee population, restricted business travel, and provided resources for complying with the guidance from the World Health
Organization, the U.S. Centers for Disease Control and governments. Our operations teams seek to operate without significant disruptions in service. Our pandemic strategy takes into consideration that a pandemic could
be widespread and may occur in multiple waves, affecting different communities at different times with varying levels of severity. We cannot, however, predict the impact that natural or man-made disasters, including
the COVID-19 pandemic, may have on the ability of our employees and third-party service providers to continue ordinary business operations and technology functions over near- or longer-term periods.
Shareholder concentration risk
At June 30, 2020, affiliated
shareholders of record owned 100.0% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 10. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
| 26 | Columbia Variable Portfolio – Long Government/Credit Bond Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Note 11. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial.
| Columbia Variable Portfolio – Long Government/Credit Bond Fund | Semiannual Report 2020 | 27 |
Liquidity Risk
Management Program
Pursuant to Rule 22e-4 under the
1940 Act, the Fund has adopted a liquidity risk management program (Program). The Program’s principal objectives include assessing, managing and periodically reviewing the Fund’s liquidity risk. Liquidity
risk is defined as the risk that the Fund could not meet redemption requests without significant dilution of remaining investors’ interests in the Fund.
The Board has appointed the
Investment Manager as the program administrator for the Fund’s Program. The Investment Manager has delegated oversight of the Program to its Liquidity Risk Management Committee (the Committee). At a board
meeting during the fiscal period, the Committee provided the Board with a report addressing the operations of the program and assessing its adequacy and effectiveness of implementation for the period December 1, 2018,
through December 31, 2019, including:
| • | the Fund had sufficient liquidity to both meet redemptions and operate effectively on behalf of shareholders; |
| • | there were no material changes to the Program during the period; |
| • | the implementation of the Program was effective to manage the Fund’s liquidity risk; and |
| • | the Program operated adequately during the period. |
There can be no assurance that the
Program will achieve its objectives in the future. Please refer to the Fund’s prospectus for more information regarding the Fund’s exposure to liquidity risk and other principal risks to which an
investment in the Fund may be subject.
Board Consideration
and Approval of Management
Agreement
On June 17, 2020, the Board of
Trustees (the Board) and the Trustees who are not interested persons (as defined in the Investment Company Act of 1940) (the Independent Trustees) of Columbia Funds Variable Insurance Trust (the Trust) unanimously
approved the continuation of the Management Agreement (the Management Agreement) with Columbia Management Investment Advisers, LLC (the Investment Manager) with respect to Columbia Variable Portfolio – Long
Government/Credit Bond Fund (the Fund), a series of the Trust. As detailed below, the Board’s Advisory Fees and Expenses Committee (the Committee) and the Board met on multiple occasions to review and discuss,
among themselves, with the management team of the Investment Manager and with an independent fee consultant, materials provided by the Investment Manager, the independent fee consultant and others before determining
to approve the continuation of the Management Agreement.
In connection with their
deliberations regarding the continuation of the Management Agreement, the Committee and the Board evaluated materials requested from the Investment Manager regarding the Fund and the Management Agreement, and
discussed these materials with representatives of the Investment Manager at Committee meetings held on March 10, 2020, April 30, 2020 and June 17, 2020 and at Board meetings held on March 11, 2020 and June 17, 2020.
In addition, the Board and its various committees consider matters bearing on the Management Agreement at other meetings throughout the year and in prior years and meet regularly with senior management of the Trust
and the Investment Manager. Through the Board’s Investment Oversight Committees, Trustees also meet with selected portfolio managers of the funds the Trustees oversee and with other investment personnel at
various times throughout the year. The Committee and the Board also consulted with the independent fee consultant, Fund counsel and the Independent Trustees’ independent legal counsel, who advised on various
matters with respect to the Committee’s and the Board’s considerations and otherwise assisted the Committee and the Board in their deliberations. On June 17, 2020, the Committee recommended that the Board
approve the continuation of the Management Agreement. On June 17, 2020, the Board, including the Independent Trustees, voting separately, unanimously approved the continuation of the Management Agreement for the
Fund.
| 28 | Columbia Variable Portfolio – Long Government/Credit Bond Fund | Semiannual Report 2020 |
Board Consideration and Approval of
Management
Agreement (continued)
The Committee and the Board considered all
information that they, their legal counsel or the Investment Manager believed reasonably necessary to evaluate and to determine whether to recommend for approval or approve the continuation of the Management
Agreement. The information and factors considered by the Committee and the Board in recommending for approval or approving the continuation of the Management Agreement for the Fund included the following:
| • | Information on the investment performance of the Fund relative to the performance of a group of mutual funds determined to be comparable to the Fund by the Investment Manager, as well as performance relative to benchmarks; |
| • | Information on the Fund’s management fees and total expenses, including information comparing the Fund’s expenses to those of a group of comparable mutual funds, as determined by the Investment Manager; |
| • | The Investment Manager’s agreement to contractually limit or cap total operating expenses for the Fund through April 30, 2021 so that total operating expenses (excluding certain fees and expenses, such as transaction costs and certain other investment related expenses, interest, taxes, acquired fund fees and expenses, and infrequent and/or unusual expenses) would not exceed a specified annual rate, as a percentage of the Fund’s net assets; |
| • | The terms and conditions of the Management Agreement; |
| • | The current and proposed terms and conditions of other agreements and arrangements with affiliates of the Investment Manager relating to the operations of the Fund, including agreements with respect to the provision of distribution, transfer agency and shareholder services to the Fund; |
| • | Descriptions of various functions performed by the Investment Manager under the Management Agreement, including portfolio management and portfolio trading practices; |
| • | Information regarding any recently negotiated management fees of similarly-managed portfolios of other institutional clients of the Investment Manager; |
| • | Information regarding the reputation, regulatory history and resources of the Investment Manager, including information regarding senior management, portfolio managers and other personnel; |
| • | Information regarding the capabilities of the Investment Manager with respect to compliance monitoring services, including an assessment of the Investment Manager’s compliance system by the Fund’s Chief Compliance Officer; and |
| • | The profitability to the Investment Manager and its affiliates from their relationships with the Fund. |
Nature, extent and quality of
services provided under the Management Agreement
The Committee and the Board
considered the nature, extent and quality of services provided to the Fund by the Investment Manager and its affiliates under the Management Agreement and under separate agreements for the provision of transfer agency
and shareholder services, and the resources dedicated to the Fund and the other Columbia Funds by the Investment Manager and its affiliates. The Committee and the Board considered, among other things, the Investment
Manager’s ability to attract, motivate and retain highly qualified research, advisory and supervisory investment professionals (including compensation programs for personnel involved in fund management,
reputation and other attributes), the portfolio management services provided by those investment professionals, and the quality of the Investment Manager’s investment research capabilities and trade execution
services. The Committee and the Board also considered the potential benefits to shareholders of investing in a mutual fund that is part of a fund complex offering exposure to a variety of asset classes and investment
disciplines and providing a variety of fund and shareholder services.
The Committee and the Board also
considered the professional experience and qualifications of the senior personnel of the Investment Manager, which included consideration of the Investment Manager’s experience with funds using an investment
strategy similar to that used by the Investment Manager for the Fund. The Committee and the Board noted the compliance programs of and the compliance-related resources provided to the Fund by the Investment Manager
and its affiliates and the resources dedicated by the Investment Manager and its affiliates to risk management, and considered the Investment Manager’s ability to provide administrative services to the Fund and
coordinate the activities of the Fund’s other service
| Columbia Variable Portfolio – Long Government/Credit Bond Fund | Semiannual Report 2020 | 29 |
Board Consideration and Approval of
Management
Agreement (continued)
providers. After reviewing these and related
factors, the Committee and the Board concluded, within the context of their overall conclusions, that the nature, extent and quality of the services provided to the Fund under the Management Agreement supported the
continuation of the Management Agreement.
Investment performance
The Committee and the Board
reviewed information about the performance of the Fund over various time periods, including performance information relative to benchmarks, information that compared the performance of the Fund to the performance of a
group of comparable mutual funds as determined by the Investment Manager, and information and analysis provided by the independent fee consultant. The Committee and the Board also reviewed a description of the
Investment Manager’s methodology for identifying the Fund’s peer groups for purposes of performance and expense comparisons.
The Committee and the Board noted
that, through December 31, 2019, the Fund’s performance was in the twelfth, twelfth, and twelfth percentile (where the best performance would be in the first percentile) of its category selected by the
Investment Manager for the purposes of performance comparisons for the one-, three- and five-year periods, respectively.
The Committee and the Board also
considered the Investment Manager’s performance and reputation generally, the Investment Manager’s historical responsiveness to Board concerns about performance, and the Investment Manager’s
willingness to take steps intended to improve performance. After reviewing these and related factors, the Committee and the Board concluded, within the context of their overall conclusions, that the performance of the
Fund and the Investment Manager was sufficient, in light of other considerations, to support the continuation of the Management Agreement.
Investment management fee rates
and other expenses
The Committee and the Board
considered the management fees charged to the Fund under the Management Agreement as well as the total expenses incurred by the Fund. In assessing the reasonableness of the fees under the Management Agreement, the
Committee and the Board considered, among other information, the Fund’s total expense ratio as a percentage of average daily net assets. The Committee and the Board considered data provided by the Investment
Manager and the independent fee consultant. The Committee and the Board noted that, as of December 31, 2019, the Fund’s actual management fee and net total expense ratio were ranked in the fourth and second
quintiles, respectively, (where the lowest fees and expenses would be in the first quintile) against the Fund’s expense universe as determined by the Investment Manager for purposes of expense comparison. The
Committee and the Board also took into account the fee waiver and expense limitation arrangements agreed to by the Investment Manager, as noted above.
The Committee and the Board also
received and considered information about the management fees charged by the Investment Manager to institutional accounts. In considering the fees charged to those accounts, the Committee and the Board took into
account, among other things, the Investment Manager’s representations about the differences between managing mutual funds as compared to other types of accounts, including differences in the services provided,
differences in the risk profile of such business for the Investment Manager and the additional resources required to manage mutual funds effectively. The Committee and the Board also received and considered
information about the fees charged by the Investment Manager for sub-advisory services it provides to comparable unaffiliated funds. In evaluating the Fund’s management fees, the Committee and the Board also
took into account the demands, complexity and quality of the investment management of the Fund.
After reviewing these and related
factors, the Committee and the Board concluded, within the context of their overall conclusions, that the management fee rates and expenses of the Fund, in light of other considerations, supported the continuation of
the Management Agreement.
Costs of services provided and
profitability
The Committee and the Board also
took note of the costs the Investment Manager and its affiliates incur in connection with the services provided and the profitability to the Investment Manager and its affiliates from their relationships with the
Fund, and the efforts undertaken by the Investment Manager and its affiliates to manage efficiently their costs to provide such services.
| 30 | Columbia Variable Portfolio – Long Government/Credit Bond Fund | Semiannual Report 2020 |
Board Consideration and Approval of
Management
Agreement (continued)
The Committee and the Board also considered the
compensation directly or indirectly received by the Investment Manager’s affiliates in connection with their relationships with the Fund. The Committee and the Board reviewed information provided by management
as to the profitability to the Investment Manager and its affiliates of their relationships with the Fund, information about the allocation of expenses used to calculate profitability, and comparisons of profitability
levels realized in 2019 to profitability levels realized in 2018. When reviewing profitability, the Committee and the Board also considered court cases in which adviser profitability was an issue in whole or in part,
the performance of similarly managed funds, the performance of the Fund, and the expense ratio of the Fund. In addition, the Committee and the Board considered information provided by the Investment Manager regarding
the Investment Manager’s financial condition and comparing its profitability to that of other asset management firms that are, or are subsidiaries of, publicly traded companies. In this regard, the Committee and
the Board also considered data provided by the independent fee consultant.
After reviewing these and related
factors, the Committee and the Board concluded, within the context of their overall conclusions, that the costs of services provided and the profitability to the Investment Manager and its affiliates from their
relationships with the Fund supported the continuation of the Management Agreement.
Economies of scale
The Committee and the Board
considered the potential existence of economies of scale in the provision by the Investment Manager of services to the Fund, to groups of related funds, and to the Investment Manager’s investment advisory
clients as a whole, and whether those economies of scale were shared with the Fund through breakpoints in investment management fees or other means, such as expense limitation arrangements and additional investments
by the Investment Manager in investment, trading, compliance and other resources. The Committee and the Board noted that the management fee schedules for the Fund contained breakpoints that would reduce the fee rate
on assets above specified threshold levels.
In considering these matters, the
Committee and the Board also considered the costs of the services provided and the profitability to the Investment Manager and its affiliates from their relationships with the Fund, as noted above. After reviewing
these and related factors, the Committee and the Board concluded, within the context of their overall conclusions, that the extent to which any economies of scale were expected to be shared with the Fund supported the
continuation of the Management Agreement.
Other benefits to the Investment
Manager
The Committee and the Board
received and considered information regarding “fall-out” or ancillary benefits received by the Investment Manager and its affiliates as a result of their relationships with the Fund, such as the engagement
of the Investment Manager’s affiliates to provide distribution, transfer agency and shareholder services to the Fund. In this regard, among other matters, the Committee and the Board considered that the
Fund’s distributor retains a portion of the distribution fees from the Fund. The Committee and the Board also considered the benefits of research made available to the Investment Manager by reason of brokerage
commissions generated by the Fund’s securities transactions, and reviewed information about the Investment Manager’s practices with respect to considering brokerage and research services when allocating
portfolio transactions. In this connection, the Board also noted that the amount of research made available to the Investment Manager by reason of brokerage commissions had been declining over time, and may decline
further. The Committee and the Board recognized that the Investment Manager’s profitability would be somewhat lower without these benefits.
Conclusion
The Committee and the Board
reviewed all of the above considerations in reaching their decisions to recommend or approve the continuation of the Management Agreement. In their deliberations, the Trustees did not identify any particular
information that was all-important or controlling, and individual Trustees may have attributed different weights to the various factors. Based on their evaluation of all factors that they deemed to be material,
including those factors described above, and assisted by the advice of independent legal counsel, the Board, including the Independent Trustees, voting separately, unanimously approved the continuation of the
Management Agreement.
| Columbia Variable Portfolio – Long Government/Credit Bond Fund | Semiannual Report 2020 | 31 |
Results of Meeting of
Shareholders
At a Joint Special Meeting of
Shareholders held on April 16, 2020, shareholders of Columbia Funds Variable Insurance Trust elected each of the ten nominees for the trustees to the Board of Trustees of Columbia Funds Variable Insurance Trust, each
to hold office until he or she dies, resigns or is removed or, if sooner, until the next meeting of shareholders called for the purpose of electing trustees and until the election and qualification of his or her
successor, as follows:
| Trustee | Votes For | Votes Withheld | Abstentions |
| Janet L. Carrig | 26,231,108,809 | 1,129,334,152 | 0 |
| J. Kevin Connaughton | 26,249,644,638 | 1,110,798,323 | 0 |
| Olive Darragh | 26,323,990,658 | 1,036,452,304 | 0 |
| Douglas A. Hacker | 26,255,762,920 | 1,104,680,042 | 0 |
| Nancy T. Lukitsh | 26,332,381,722 | 1,028,061,240 | 0 |
| David M. Moffett | 26,252,719,395 | 1,107,723,567 | 0 |
| John J. Neuhauser | 26,222,694,456 | 1,137,748,505 | 0 |
| Christopher O. Petersen | 26,265,703,212 | 1,094,739,749 | 0 |
| Patrick J. Simpson | 26,222,908,024 | 1,137,534,938 | 0 |
| Natalie A. Trunow | 26,340,164,732 | 1,020,278,229 | 0 |
| 32 | Columbia Variable Portfolio – Long Government/Credit Bond Fund | Semiannual Report 2020 |
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Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 225 Franklin Street, Boston, MA
02110-2804
© 2020 Columbia Management Investment
Advisers, LLC.
C-1877 AP (8/20)
Columbia Variable
Portfolio – Small Company Growth Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
| 3 | |
| 5 | |
| 6 | |
| 10 | |
| 11 | |
| 12 | |
| 14 | |
| 16 | |
| 24 | |
| 24 | |
| 28 |
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which Columbia Variable Portfolio – Small Company Growth Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov.
Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge
by visiting columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT, and for reporting periods ended prior to March 31, 2019, on Form N-Q. The Fund’s Form N-Q and Form N-PORT
filings are available on the SEC’s website at sec.gov. The Fund’s complete schedule of portfolio holdings, as filed on Form N-Q or Form N-PORT, can also be obtained without charge, upon request, by calling
800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
225 Franklin Street
Boston, MA 02110
Fund distributor
Columbia Management Investment Distributors,
Inc.
225 Franklin Street
Boston, MA 02110
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Columbia Variable Portfolio – Small Company
Growth Fund | Semiannual Report 2020
Fund at a Glance
(Unaudited)
(Unaudited)
Investment objective
The Fund
seeks long-term capital appreciation.
Portfolio management
Daniel Cole, CFA
Co-Portfolio Manager
Managed Fund since 2015
Wayne Collete, CFA
Co-Portfolio Manager
Managed Fund since 2010
Lawrence Lin, CFA
Co-Portfolio Manager
Managed Fund since 2010
| Columbia Variable Portfolio – Small Company Growth Fund | Semiannual Report 2020 | 3 |
Fund at a Glance (continued)
(Unaudited)
(Unaudited)
| 4 | Columbia Variable Portfolio – Small Company Growth Fund | Semiannual Report 2020 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount 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 $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
| January 1, 2020 — June 30, 2020 | |||||||
| Account value at the beginning of the period ($) | Account value at the end of the period ($) | Expenses paid during the period ($) | Fund’s annualized expense ratio (%) | ||||
| Actual | Hypothetical | Actual | Hypothetical | Actual | Hypothetical | Actual | |
| Class 1 | 1,000.00 | 1,000.00 | 1,202.60 | 1,020.44 | 4.87 | 4.47 | 0.89 |
| Class 2 | 1,000.00 | 1,000.00 | 1,200.60 | 1,019.19 | 6.24 | 5.72 | 1.14 |
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 366.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
Had Columbia Management Investment
Advisers, LLC and/or certain of its affiliates not waived/reimbursed certain fees and expenses, account value at the end of the period would have been reduced.
| Columbia Variable Portfolio – Small Company Growth Fund | Semiannual Report 2020 | 5 |
Portfolio of Investments
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 6 | Columbia Variable Portfolio – Small Company Growth Fund | Semiannual Report 2020 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Small Company Growth Fund | Semiannual Report 2020 | 7 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Notes to Portfolio of
Investments
| (a) | Non-income producing investment. |
| (b) | The rate shown is the seven-day current annualized yield at June 30, 2020. |
| (c) | As defined in the Investment Company Act of 1940, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the period ended June 30, 2020 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.253% | ||||||||
| 6,713,926 | 99,864,743 | (93,201,645) | 152 | 13,377,176 | 5,618 | 68,482 | 13,377,176 | |
Fair value
measurements
The Fund categorizes
its fair value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when
available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that
reflect the Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input
that is deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For
example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active
market.
Fair value inputs are
summarized in the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 8 | Columbia Variable Portfolio – Small Company Growth Fund | Semiannual Report 2020 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Fair value measurements (continued)
Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy.
Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at June 30, 2020:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Common Stocks | ||||
| Communication Services | 6,965,649 | — | — | 6,965,649 |
| Consumer Discretionary | 63,115,084 | — | — | 63,115,084 |
| Energy | 2,528,824 | — | — | 2,528,824 |
| Financials | 11,581,489 | — | — | 11,581,489 |
| Health Care | 135,570,668 | — | — | 135,570,668 |
| Industrials | 68,408,642 | — | — | 68,408,642 |
| Information Technology | 84,029,367 | — | — | 84,029,367 |
| Materials | 8,193,317 | — | — | 8,193,317 |
| Real Estate | 10,977,972 | — | — | 10,977,972 |
| Total Common Stocks | 391,371,012 | — | — | 391,371,012 |
| Money Market Funds | 13,377,176 | — | — | 13,377,176 |
| Total Investments in Securities | 404,748,188 | — | — | 404,748,188 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Small Company Growth Fund | Semiannual Report 2020 | 9 |
Statement of Assets and Liabilities
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $318,178,940) | $391,371,012 |
| Affiliated issuers (cost $13,377,176) | 13,377,176 |
| Receivable for: | |
| Investments sold | 1,884,560 |
| Dividends | 156,526 |
| Expense reimbursement due from Investment Manager | 195 |
| Trustees’ deferred compensation plan | 61,630 |
| Total assets | 406,851,099 |
| Liabilities | |
| Payable for: | |
| Capital shares purchased | 179,118 |
| Management services fees | 9,449 |
| Distribution and/or service fees | 6 |
| Service fees | 4,230 |
| Compensation of board members | 27,960 |
| Compensation of chief compliance officer | 13 |
| Other expenses | 14,642 |
| Trustees’ deferred compensation plan | 61,630 |
| Total liabilities | 297,048 |
| Net assets applicable to outstanding capital stock | $406,554,051 |
| Represented by | |
| Paid in capital | 316,409,895 |
| Total distributable earnings (loss) | 90,144,156 |
| Total - representing net assets applicable to outstanding capital stock | $406,554,051 |
| Class 1 | |
| Net assets | $405,715,187 |
| Shares outstanding | 18,933,035 |
| Net asset value per share | $21.43 |
| Class 2 | |
| Net assets | $838,864 |
| Shares outstanding | 41,581 |
| Net asset value per share | $20.17 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 10 | Columbia Variable Portfolio – Small Company Growth Fund | Semiannual Report 2020 |
Statement of Operations
Six Months Ended June 30, 2020 (Unaudited)
Six Months Ended June 30, 2020 (Unaudited)
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $596,173 |
| Dividends — affiliated issuers | 68,482 |
| Interfund lending | 30 |
| Total income | 664,685 |
| Expenses: | |
| Management services fees | 1,459,791 |
| Distribution and/or service fees | |
| Class 2 | 760 |
| Service fees | 21,895 |
| Compensation of board members | 7,011 |
| Custodian fees | 5,322 |
| Printing and postage fees | 6,863 |
| Audit fees | 15,715 |
| Legal fees | 3,898 |
| Compensation of chief compliance officer | 63 |
| Other | 3,276 |
| Total expenses | 1,524,594 |
| Fees waived or expenses reimbursed by Investment Manager and its affiliates | (31,318) |
| Total net expenses | 1,493,276 |
| Net investment loss | (828,591) |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 11,121,460 |
| Investments — affiliated issuers | 5,618 |
| Foreign currency translations | (903) |
| Net realized gain | 11,126,175 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | 58,163,749 |
| Investments — affiliated issuers | 152 |
| Net change in unrealized appreciation (depreciation) | 58,163,901 |
| Net realized and unrealized gain | 69,290,076 |
| Net increase in net assets resulting from operations | $68,461,485 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Columbia Variable Portfolio – Small Company Growth Fund | Semiannual Report 2020 | 11 |
Statement of Changes in Net Assets
| Six Months Ended June 30, 2020 (Unaudited) | Year Ended December 31, 2019 | |
| Operations | ||
| Net investment loss | $(828,591) | $(429,095) |
| Net realized gain | 11,126,175 | 7,273,513 |
| Net change in unrealized appreciation (depreciation) | 58,163,901 | 16,447,388 |
| Net increase in net assets resulting from operations | 68,461,485 | 23,291,806 |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class 1 | — | (6,000,386) |
| Class 2 | — | (116,037) |
| Total distributions to shareholders | — | (6,116,423) |
| Increase (decrease) in net assets from capital stock activity | (47,944) | 295,855,272 |
| Total increase in net assets | 68,413,541 | 313,030,655 |
| Net assets at beginning of period | 338,140,510 | 25,109,855 |
| Net assets at end of period | $406,554,051 | $338,140,510 |
| Six Months Ended | Year Ended | |||
| June 30, 2020 (Unaudited) | December 31, 2019 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 184,995 | 3,202,238 | 17,276,396 | 294,484,935 |
| Distributions reinvested | — | — | 344,652 | 6,000,386 |
| Redemptions | (194,063) | (3,369,571) | (252,661) | (4,629,598) |
| Net increase (decrease) | (9,068) | (167,333) | 17,368,387 | 295,855,723 |
| Class 2 | ||||
| Subscriptions | 10,398 | 167,341 | 1,128 | 19,974 |
| Distributions reinvested | — | — | 7,062 | 116,037 |
| Redemptions | (2,893) | (47,952) | (7,597) | (136,462) |
| Net increase (decrease) | 7,505 | 119,389 | 593 | (451) |
| Total net increase (decrease) | (1,563) | (47,944) | 17,368,980 | 295,855,272 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 12 | Columbia Variable Portfolio – Small Company Growth Fund | Semiannual Report 2020 |
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| Columbia Variable Portfolio – Small Company Growth Fund | Semiannual Report 2020 | 13 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income (loss) | Net realized and unrealized gain | Total from investment operations | Distributions from net realized gains | Total distributions to shareholders | |
| Class 1 | ||||||
| Six Months Ended 6/30/2020 (Unaudited) | $17.82 | (0.04) | 3.65 | 3.61 | — | — |
| Year Ended 12/31/2019 | $15.64 | (0.06) | 6.33 | 6.27 | (4.09) | (4.09) |
| Year Ended 12/31/2018 | $18.71 | (0.06) | 0.02 | (0.04) | (3.03) | (3.03) |
| Year Ended 12/31/2017 | $15.31 | (0.06) | 4.43 | 4.37 | (0.97) | (0.97) |
| Year Ended 12/31/2016 | $16.85 | (0.02) | 1.93 | 1.91 | (3.45) | (3.45) |
| Year Ended 12/31/2015 | $17.04 | (0.08) | 0.82 | 0.74 | (0.93) | (0.93) |
| Class 2 | ||||||
| Six Months Ended 6/30/2020 (Unaudited) | $16.80 | (0.06) | 3.43 | 3.37 | — | — |
| Year Ended 12/31/2019 | $14.91 | (0.11) | 6.04 | 5.93 | (4.04) | (4.04) |
| Year Ended 12/31/2018 | $17.97 | (0.10) | 0.03 | (0.07) | (2.99) | (2.99) |
| Year Ended 12/31/2017 | $14.75 | (0.10) | 4.25 | 4.15 | (0.93) | (0.93) |
| Year Ended 12/31/2016 | $16.34 | (0.06) | 1.87 | 1.81 | (3.40) | (3.40) |
| Year Ended 12/31/2015 | $16.59 | (0.12) | 0.80 | 0.68 | (0.93) | (0.93) |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Annualized. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 14 | Columbia Variable Portfolio – Small Company Growth Fund | Semiannual Report 2020 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income (loss) ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Six Months Ended 6/30/2020 (Unaudited) | $21.43 | 20.26% | 0.91%(c) | 0.89%(c) | (0.49%)(c) | 52% | $405,715 |
| Year Ended 12/31/2019 | $17.82 | 40.70% | 0.97% | 0.89% | (0.36%) | 100% | $337,568 |
| Year Ended 12/31/2018 | $15.64 | (1.75%) | 1.24% | 0.90% | (0.31%) | 156% | $24,611 |
| Year Ended 12/31/2017 | $18.71 | 29.25% | 1.25% | 0.93% | (0.38%) | 153% | $30,341 |
| Year Ended 12/31/2016 | $15.31 | 12.74% | 1.29% | 0.94% | (0.13%) | 183% | $26,912 |
| Year Ended 12/31/2015 | $16.85 | 3.83% | 1.17% | 0.96% | (0.47%) | 150% | $27,479 |
| Class 2 | |||||||
| Six Months Ended 6/30/2020 (Unaudited) | $20.17 | 20.06% | 1.16%(c) | 1.14%(c) | (0.74%)(c) | 52% | $839 |
| Year Ended 12/31/2019 | $16.80 | 40.39% | 1.22% | 1.14% | (0.62%) | 100% | $572 |
| Year Ended 12/31/2018 | $14.91 | (2.00%) | 1.49% | 1.15% | (0.55%) | 156% | $499 |
| Year Ended 12/31/2017 | $17.97 | 28.84% | 1.50% | 1.18% | (0.63%) | 153% | $540 |
| Year Ended 12/31/2016 | $14.75 | 12.53% | 1.54% | 1.19% | (0.38%) | 183% | $454 |
| Year Ended 12/31/2015 | $16.34 | 3.56% | 1.42% | 1.21% | (0.72%) | 150% | $495 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Small Company Growth Fund | Semiannual Report 2020 | 15 |
Notes to Financial Statements
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Note 1. Organization
Columbia Variable Portfolio
– Small Company Growth Fund (the Fund), a series of Columbia Funds Variable Insurance Trust (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the
1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1 and Class 2 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued by
affiliated and unaffiliated life insurance companies (Participating Insurance Companies) as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors (Qualified
Investors) authorized by Columbia Management Investment Distributors, Inc. (the Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by participating in a Qualified Plan or by
buying a Contract and making allocations to the Fund. Although all share classes generally have identical voting, dividend and liquidation rights, each share class votes separately when required by the Trust’s
organizational documents or by law. Different share classes pay different net investment income distribution amounts to the extent the expenses of such share classes differ, and distributions in liquidation will be
proportional to the net asset value of each share class. Each share class has its own cost structure and other features.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on any
exchange are valued at the mean between the closing bid and asked prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Foreign equity securities are
valued based on the closing price on the foreign exchange in which such securities are primarily traded. If any foreign equity security closing prices are not readily available, the securities are valued at the mean
of the latest quoted bid and ask prices on such exchanges or markets. Foreign currency exchange rates are determined at the scheduled closing time of the New York Stock Exchange. Many securities markets and exchanges
outside the U.S. close prior to the close of the New York Stock Exchange; therefore, the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but
before the close of the New York Stock Exchange. In those situations, foreign securities will be fair valued pursuant to a policy adopted by the Board of Trustees. Under the policy, the Fund may utilize a third-party
pricing service to determine these fair values. The third-party pricing service takes into account multiple factors, including, but not limited to, movements in the U.S. securities markets, certain depositary
receipts, futures contracts and foreign exchange rates that have occurred subsequent to the close of the foreign exchange or market, to determine a good faith estimate that reasonably reflects the current market
conditions as of the close of the New York Stock Exchange. The fair value of a security is likely to be different from the quoted or published price, if available.
Investments in open-end investment
companies (other than ETFs), are valued at the latest net asset value reported by those companies as of the valuation time.
| 16 | Columbia Variable Portfolio – Small Company Growth Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Foreign currency transactions and
translations
The values of all assets and
liabilities denominated in foreign currencies are generally translated into U.S. dollars at exchange rates determined at the close of regular trading on the New York Stock Exchange. Net realized and unrealized gains
(losses) on foreign currency transactions and translations include gains (losses) arising from the fluctuation in exchange rates between trade and settlement dates on securities transactions, gains (losses) arising
from the disposition of foreign currency and currency gains (losses) between the accrual and payment dates on dividends, interest income and foreign withholding taxes.
For financial statement purposes,
the Fund does not distinguish that portion of gains (losses) on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations
are included with the net realized and unrealized gains (losses) on investments in the Statement of Operations.
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Corporate actions and dividend
income are generally recorded net of any non-reclaimable tax withholdings, on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a
proportionate change in return of capital to shareholders.
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
| Columbia Variable Portfolio – Small Company Growth Fund | Semiannual Report 2020 | 17 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund intends to qualify each
year as a regulated investment company under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its investment company taxable income and net capital gain, if any, for its
tax year, and as such will not be subject to federal income taxes. In addition, because the Fund meets the exception under Internal Revenue Code Section 4982(f), the Fund expects not to be subject to federal excise
tax. Therefore, no federal income or excise tax provision is recorded.
Distributions to subaccounts
Distributions to the subaccounts of
Contracts, Qualified Plans and Qualified Investors are recorded at the close of business on the record date and are payable on the first business day following the record date. Dividends from net investment income, if
any, are declared and distributed annually. Capital gain distributions, when available, will be made annually. However, an additional capital gain distribution may be made during the fiscal year in order to comply
with the Internal Revenue Code, as applicable to registered investment companies. Income distributions and capital gain distributions are determined in accordance with federal income tax regulations, which may differ
from GAAP. All dividends and distributions are reinvested in additional shares of the applicable share class of the Fund at the net asset value as of the ex-dividend date of the distribution.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The management services fee is an annual fee that is equal to a percentage of the
Fund’s daily net assets that declines from 0.87% to 0.75% as the Fund’s net assets increase. The annualized effective management services fee rate for the six months ended June 30, 2020 was 0.87% of the
Fund’s average daily net assets.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. These members of the Board of Trustees
may participate in a Deferred Compensation Plan (the Deferred Plan) which may be terminated at any time. Obligations of the Deferred Plan will be paid solely out of the Fund’s assets, and all amounts payable
under the Deferred Plan constitute a general unsecured obligation of the Fund.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
| 18 | Columbia Variable Portfolio – Small Company Growth Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The annualized
effective service fee rate for the six months ended June 30, 2020, was 0.01% of the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. The Board of Trustees has approved, and the Fund has adopted, a distribution plan
(the Plan) which sets the distribution fees for the Fund. These fees are calculated daily and are intended to compensate the Distributor for selling shares of the Fund. The Fund pays a monthly distribution fee to the
Distributor at the maximum annual rate of 0.25% of the average daily net assets attributable to Class 2 shares of the Fund. The Fund pays no distribution and service fees for Class 1 shares.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft charges from the Fund’s
custodian, do not exceed the following annual rate(s) as a percentage of the class’ average daily net assets:
| Contractual expense cap July 1, 2020 through April 30, 2021 | Voluntary expense cap May 1, 2020 through June 30, 2020 | Contractual expense cap prior to May 1, 2020 | |
| Class 1 | 0.90% | 0.89% | 0.89% |
| Class 2 | 1.15 | 1.14 | 1.14 |
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and
brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program fees and expenses, transaction charges and interest on borrowed
money, interest, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This agreement may be modified or amended only with approval from
the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements described above are not recoverable by the Investment Manager or
its affiliates in future periods.
Note 4. Federal tax
information
The timing and character of
income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP because of temporary or permanent book to tax differences.
| Columbia Variable Portfolio – Small Company Growth Fund | Semiannual Report 2020 | 19 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
At June 30, 2020, the approximate
cost of all investments for federal income tax purposes and the aggregate gross approximate unrealized appreciation and depreciation based on that cost was:
| Federal tax cost ($) | Gross unrealized appreciation ($) | Gross unrealized (depreciation) ($) | Net unrealized appreciation ($) |
| 331,556,000 | 84,477,000 | (11,285,000) | 73,192,000 |
Tax cost of investments and
unrealized appreciation/(depreciation) may also include timing differences that do not constitute adjustments to tax basis.
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Note 5. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $172,466,432 and $185,846,730, respectively, for the six months ended June 30, 2020. The amount of purchase
and sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 6. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes referred to
as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 7. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund’s activity in the
Interfund Program during the six months ended June 30, 2020 was as follows:
| Borrower or lender | Average loan balance ($) | Weighted average interest rate (%) | Number of days with outstanding loans |
| Lender | 1,700,000 | 0.63 | 1 |
Interest income earned by the Fund
is recorded as Interfund lending in the Statement of Operations. The Fund had no outstanding interfund loans at June 30, 2020.
| 20 | Columbia Variable Portfolio – Small Company Growth Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Note 8. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by Citibank, N.A., HSBC Bank USA, N.A. and JPMorgan Chase Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. The credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment Manager or an affiliated investment manager, severally and
not jointly, permits collective borrowings up to $1 billion. Interest is charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the
one-month LIBOR rate and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a
commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The commitment fee is included in other expenses in the Statement of Operations. This agreement
expires annually in December unless extended or renewed.
The Fund had no borrowings during
the six months ended June 30, 2020.
Note 9. Significant
risks
Health care sector risk
The Fund may be more susceptible to
the particular risks that may affect companies in the health care sector than if it were invested in a wider variety of companies in unrelated sectors. Companies in the health care sector are subject to certain risks,
including restrictions on government reimbursement for medical expenses, government approval of medical products and services, competitive pricing pressures, and the rising cost of medical products and services
(especially for companies dependent upon a relatively limited number of products or services). Performance of such companies may be affected by factors including, government regulation, obtaining and protecting
patents (or the failure to do so), product liability and other similar litigation as well as product obsolescence.
Information technology sector risk
The Fund may be more susceptible to
the particular risks that may affect companies in the information technology sector than if it were invested in a wider variety of companies in unrelated sectors. Companies in the information technology sectors are
subject to certain risks, including the risk that new services, equipment or technologies will not be accepted by consumers and businesses or will become rapidly obsolete. Performance of such companies may be affected
by factors including obtaining and protecting patents (or the failure to do so) and significant competitive pressures, including aggressive pricing of their products or services, new market entrants, competition for
market share and short product cycles due to an accelerated rate of technological developments. Such competitive pressures may lead to limited earnings and/or falling profit margins. As a result, the value of their
securities may fall or fail to rise. In addition, many information technology sector companies have limited operating histories and prices of these companies’ securities historically have been more volatile than
other securities, especially over the short term.
Market and environment risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
| Columbia Variable Portfolio – Small Company Growth Fund | Semiannual Report 2020 | 21 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
The Fund performance may also be
significantly negatively impacted by the economic impact of the coronavirus disease 2019 (COVID-19) pandemic. Public health crisis has become a pandemic that has resulted in, and may continue to result in, significant
global economic and societal disruption and market volatility due to disruptions in market access, resource availability, facilities operations, imposition of tariffs, export controls and supply chain disruption,
among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement and loss in human and other resources. The uncertainty surrounding the magnitude, duration,
reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as
the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and pandemics that may arise in the future – could negatively affect global economies and markets
in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in emerging market countries may be greater due to generally less established healthcare systems,
governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The disruptions caused
by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively impact the Fund’s ability to achieve their investment objectives. Any such event(s) could
have a significant adverse impact on the value and risk profile of the Fund.
The Investment Manager and its
affiliates have systematically implemented strategies to address the operating environment spurred by the COVID-19 pandemic. To promote the safety and security of our employees and to assure the continuity of our
business operations, we have implemented a work from home protocol for virtually all of our employee population, restricted business travel, and provided resources for complying with the guidance from the World Health
Organization, the U.S. Centers for Disease Control and governments. Our operations teams seek to operate without significant disruptions in service. Our pandemic strategy takes into consideration that a pandemic could
be widespread and may occur in multiple waves, affecting different communities at different times with varying levels of severity. We cannot, however, predict the impact that natural or man-made disasters, including
the COVID-19 pandemic, may have on the ability of our employees and third-party service providers to continue ordinary business operations and technology functions over near- or longer-term periods.
Shareholder concentration risk
At June 30, 2020, affiliated
shareholders of record owned 91.0% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Small- and mid-cap company risk
Investments in small- and
mid-capitalization companies (small- and mid-cap companies) often involve greater risks than investments in larger, more established companies (larger companies) because small- and mid-cap companies tend to have less
predictable earnings and may lack the management experience, financial resources, product diversification and competitive strengths of larger companies. Securities of small- and mid-cap companies may be less liquid
and more volatile than the securities of larger companies.
Note 10. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued. Other than as noted in Note 3 above, there were no items requiring adjustment of the financial statements or additional
disclosure.
Note 11. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory
| 22 | Columbia Variable Portfolio – Small Company Growth Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
proceedings that are likely to have a material
adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as
necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the
SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial.
| Columbia Variable Portfolio – Small Company Growth Fund | Semiannual Report 2020 | 23 |
Liquidity Risk
Management Program
Pursuant to Rule 22e-4 under the
1940 Act, the Fund has adopted a liquidity risk management program (Program). The Program’s principal objectives include assessing, managing and periodically reviewing the Fund’s liquidity risk. Liquidity
risk is defined as the risk that the Fund could not meet redemption requests without significant dilution of remaining investors’ interests in the Fund.
The Board has appointed the
Investment Manager as the program administrator for the Fund’s Program. The Investment Manager has delegated oversight of the Program to its Liquidity Risk Management Committee (the Committee). At a board
meeting during the fiscal period, the Committee provided the Board with a report addressing the operations of the program and assessing its adequacy and effectiveness of implementation for the period December 1, 2018,
through December 31, 2019, including:
| • | the Fund had sufficient liquidity to both meet redemptions and operate effectively on behalf of shareholders; |
| • | there were no material changes to the Program during the period; |
| • | the implementation of the Program was effective to manage the Fund’s liquidity risk; and |
| • | the Program operated adequately during the period. |
There can be no assurance that the
Program will achieve its objectives in the future. Please refer to the Fund’s prospectus for more information regarding the Fund’s exposure to liquidity risk and other principal risks to which an
investment in the Fund may be subject.
Board Consideration
and Approval of Management
Agreement
On June 17, 2020, the Board of
Trustees (the Board) and the Trustees who are not interested persons (as defined in the Investment Company Act of 1940) (the Independent Trustees) of Columbia Funds Variable Insurance Trust (the Trust) unanimously
approved the continuation of the Management Agreement (the Management Agreement) with Columbia Management Investment Advisers, LLC (the Investment Manager) with respect to Columbia Variable Portfolio – Small
Company Growth Fund (the Fund), a series of the Trust. As detailed below, the Board’s Advisory Fees and Expenses Committee (the Committee) and the Board met on multiple occasions to review and discuss, among
themselves, with the management team of the Investment Manager and with an independent fee consultant, materials provided by the Investment Manager, the independent fee consultant and others before determining to
approve the continuation of the Management Agreement.
In connection with their
deliberations regarding the continuation of the Management Agreement, the Committee and the Board evaluated materials requested from the Investment Manager regarding the Fund and the Management Agreement, and
discussed these materials with representatives of the Investment Manager at Committee meetings held on March 10, 2020, April 30, 2020 and June 17, 2020 and at Board meetings held on March 11, 2020 and June 17, 2020.
In addition, the Board and its various committees consider matters bearing on the Management Agreement at other meetings throughout the year and in prior years and meet regularly with senior management of the Trust
and the Investment Manager. Through the Board’s Investment Oversight Committees, Trustees also meet with selected portfolio managers of the funds the Trustees oversee and with other investment personnel at
various times throughout the year. The Committee and the Board also consulted with the independent fee consultant, Fund counsel and the Independent Trustees’ independent legal counsel, who advised on various
matters with respect to the Committee’s and the Board’s considerations and otherwise assisted the Committee and the Board in their deliberations. On June 17, 2020, the Committee recommended that the Board
approve the continuation of the Management Agreement. On June 17, 2020, the Board, including the Independent Trustees, voting separately, unanimously approved the continuation of the Management Agreement for the
Fund.
| 24 | Columbia Variable Portfolio – Small Company Growth Fund | Semiannual Report 2020 |
Board Consideration and Approval of
Management
Agreement (continued)
The Committee and the Board considered all
information that they, their legal counsel or the Investment Manager believed reasonably necessary to evaluate and to determine whether to recommend for approval or approve the continuation of the Management
Agreement. The information and factors considered by the Committee and the Board in recommending for approval or approving the continuation of the Management Agreement for the Fund included the following:
| • | Information on the investment performance of the Fund relative to the performance of a group of mutual funds determined to be comparable to the Fund by an independent third-party data provider, as well as performance relative to benchmarks; |
| • | Information on the Fund’s management fees and total expenses, including information comparing the Fund’s expenses to those of a group of comparable mutual funds, as determined by the independent third-party data provider; |
| • | The Investment Manager’s agreement to voluntarily limit or cap total operating expenses for the Fund so that total operating expenses (excluding certain fees and expenses, such as transaction costs and certain other investment related expenses, interest, taxes, acquired fund fees and expenses, and infrequent and/or unusual expenses) would not exceed a specified annual rate, as a percentage of the Fund’s net assets; |
| • | The terms and conditions of the Management Agreement; |
| • | The current and proposed terms and conditions of other agreements and arrangements with affiliates of the Investment Manager relating to the operations of the Fund, including agreements with respect to the provision of distribution, transfer agency and shareholder services to the Fund; |
| • | Descriptions of various functions performed by the Investment Manager under the Management Agreement, including portfolio management and portfolio trading practices; |
| • | Information regarding any recently negotiated management fees of similarly-managed portfolios of other institutional clients of the Investment Manager; |
| • | Information regarding the reputation, regulatory history and resources of the Investment Manager, including information regarding senior management, portfolio managers and other personnel; |
| • | Information regarding the capabilities of the Investment Manager with respect to compliance monitoring services, including an assessment of the Investment Manager’s compliance system by the Fund’s Chief Compliance Officer; and |
| • | The profitability to the Investment Manager and its affiliates from their relationships with the Fund. |
Nature, extent and quality of
services provided under the Management Agreement
The Committee and the Board
considered the nature, extent and quality of services provided to the Fund by the Investment Manager and its affiliates under the Management Agreement and under separate agreements for the provision of transfer agency
and shareholder services, and the resources dedicated to the Fund and the other Columbia Funds by the Investment Manager and its affiliates. The Committee and the Board considered, among other things, the Investment
Manager’s ability to attract, motivate and retain highly qualified research, advisory and supervisory investment professionals (including compensation programs for personnel involved in fund management,
reputation and other attributes), the portfolio management services provided by those investment professionals, and the quality of the Investment Manager’s investment research capabilities and trade execution
services. The Committee and the Board also considered the potential benefits to shareholders of investing in a mutual fund that is part of a fund complex offering exposure to a variety of asset classes and investment
disciplines and providing a variety of fund and shareholder services.
The Committee and the Board also
considered the professional experience and qualifications of the senior personnel of the Investment Manager, which included consideration of the Investment Manager’s experience with funds using an investment
strategy similar to that used by the Investment Manager for the Fund. The Committee and the Board noted the compliance programs of and the compliance-related resources provided to the Fund by the Investment Manager
and its affiliates and the resources dedicated by the Investment Manager and its affiliates to risk management, and considered the Investment Manager’s ability to provide administrative services to the Fund and
coordinate the activities of the Fund’s other service
| Columbia Variable Portfolio – Small Company Growth Fund | Semiannual Report 2020 | 25 |
Board Consideration and Approval of
Management
Agreement (continued)
providers. After reviewing these and related
factors, the Committee and the Board concluded, within the context of their overall conclusions, that the nature, extent and quality of the services provided to the Fund under the Management Agreement supported the
continuation of the Management Agreement.
Investment performance
The Committee and the Board
reviewed information about the performance of the Fund over various time periods, including performance information relative to benchmarks, information that compared the performance of the Fund to the performance of a
group of comparable mutual funds as determined by the independent third-party data provider, and information and analysis provided by the independent fee consultant. The Committee and the Board also reviewed a
description of the third party’s methodology for identifying the Fund’s peer groups for purposes of performance and expense comparisons.
The Committee and the Board noted
that, through December 31, 2019, the Fund’s performance was in the fifth, fifth and third percentile (where the best performance would be in the first percentile) of its category selected by the independent
third-party data provider for the purposes of performance comparisons for the one-, three- and five-year periods, respectively.
The Committee and the Board also
considered the Investment Manager’s performance and reputation generally, the Investment Manager’s historical responsiveness to Board concerns about performance, and the Investment Manager’s
willingness to take steps intended to improve performance. After reviewing these and related factors, the Committee and the Board concluded, within the context of their overall conclusions, that the performance of the
Fund and the Investment Manager was sufficient, in light of other considerations, to support the continuation of the Management Agreement.
Investment management fee rates
and other expenses
The Committee and the Board
considered the management fees charged to the Fund under the Management Agreement as well as the total expenses incurred by the Fund. In assessing the reasonableness of the fees under the Management Agreement, the
Committee and the Board considered, among other information, the Fund’s total expense ratio as a percentage of average daily net assets. The Committee and the Board considered data provided by the independent
third-party data provider and the independent fee consultant. The Committee and the Board noted that, as of December 31, 2019, the Fund’s actual management fee and net total expense ratio were ranked in the
first and third quintiles, respectively, (where the lowest fees and expenses would be in the first quintile) against the Fund’s expense universe as determined by the independent third-party data provider for
purposes of expense comparison. The Committee and the Board also took into account the fee waiver and expense limitation arrangements agreed to by the Investment Manager, as noted above.
The Committee and the Board also
received and considered information about the management fees charged by the Investment Manager to institutional accounts. In considering the fees charged to those accounts, the Committee and the Board took into
account, among other things, the Investment Manager’s representations about the differences between managing mutual funds as compared to other types of accounts, including differences in the services provided,
differences in the risk profile of such business for the Investment Manager and the additional resources required to manage mutual funds effectively. The Committee and the Board also received and considered
information about the fees charged by the Investment Manager for sub-advisory services it provides to comparable unaffiliated funds. In evaluating the Fund’s management fees, the Committee and the Board also
took into account the demands, complexity and quality of the investment management of the Fund.
After reviewing these and related
factors, the Committee and the Board concluded, within the context of their overall conclusions, that the management fee rates and expenses of the Fund, in light of other considerations, supported the continuation of
the Management Agreement.
Costs of services provided and
profitability
The Committee and the Board also
took note of the costs the Investment Manager and its affiliates incur in connection with the services provided and the profitability to the Investment Manager and its affiliates from their relationships with the
Fund, and the efforts undertaken by the Investment Manager and its affiliates to manage efficiently their costs to provide such services.
| 26 | Columbia Variable Portfolio – Small Company Growth Fund | Semiannual Report 2020 |
Board Consideration and Approval of
Management
Agreement (continued)
The Committee and the Board also considered the
compensation directly or indirectly received by the Investment Manager’s affiliates in connection with their relationships with the Fund. The Committee and the Board reviewed information provided by management
as to the profitability to the Investment Manager and its affiliates of their relationships with the Fund, information about the allocation of expenses used to calculate profitability, and comparisons of profitability
levels realized in 2019 to profitability levels realized in 2018. When reviewing profitability, the Committee and the Board also considered court cases in which adviser profitability was an issue in whole or in part,
the performance of similarly managed funds, the performance of the Fund, and the expense ratio of the Fund. In addition, the Committee and the Board considered information provided by the Investment Manager regarding
the Investment Manager’s financial condition and comparing its profitability to that of other asset management firms that are, or are subsidiaries of, publicly traded companies. In this regard, the Committee and
the Board also considered data provided by the independent fee consultant.
After reviewing these and related
factors, the Committee and the Board concluded, within the context of their overall conclusions, that the costs of services provided and the profitability to the Investment Manager and its affiliates from their
relationships with the Fund supported the continuation of the Management Agreement.
Economies of Scale
The Committee and the Board
considered the potential existence of economies of scale in the provision by the Investment Manager of services to the Fund, to groups of related funds, and to the Investment Manager’s investment advisory
clients as a whole, and whether those economies of scale were shared with the Fund through breakpoints in investment management fees or other means, such as expense limitation arrangements and additional investments
by the Investment Manager in investment, trading, compliance and other resources. The Committee and the Board noted that the management fee schedules for the Fund contained breakpoints that would reduce the fee rate
on assets above specified threshold levels.
In considering these matters, the
Committee and the Board also considered the costs of the services provided and the profitability to the Investment Manager and its affiliates from their relationships with the Fund, as noted above. After reviewing
these and related factors, the Committee and the Board concluded, within the context of their overall conclusions, that the extent to which any economies of scale were expected to be shared with the Fund supported the
continuation of the Management Agreement.
Other benefits to the Investment
Manager
The Committee and the Board
received and considered information regarding “fall-out” or ancillary benefits received by the Investment Manager and its affiliates as a result of their relationships with the Fund, such as the engagement
of the Investment Manager’s affiliates to provide distribution, transfer agency and shareholder services to the Fund. In this regard, among other matters, the Committee and the Board considered that the
Fund’s distributor retains a portion of the distribution fees from the Fund. The Committee and the Board also considered the benefits of research made available to the Investment Manager by reason of brokerage
commissions generated by the Fund’s securities transactions, and reviewed information about the Investment Manager’s practices with respect to considering brokerage and research services when allocating
portfolio transactions. In this connection, the Board also noted that the amount of research made available to the Investment Manager by reason of brokerage commissions had been declining over time, and may decline
further. The Committee and the Board recognized that the Investment Manager’s profitability would be somewhat lower without these benefits.
Conclusion
The Committee and the Board
reviewed all of the above considerations in reaching their decisions to recommend or approve the continuation of the Management Agreement. In their deliberations, the Trustees did not identify any particular
information that was all-important or controlling, and individual Trustees may have attributed different weights to the various factors. Based on their evaluation of all factors that they deemed to be material,
including those factors described above, and assisted by the advice of independent legal counsel, the Board, including the Independent Trustees, voting separately, unanimously approved the continuation of the
Management Agreement.
| Columbia Variable Portfolio – Small Company Growth Fund | Semiannual Report 2020 | 27 |
Results of Meeting of
Shareholders
At a Joint Special Meeting of
Shareholders held on April 16, 2020, shareholders of Columbia Funds Variable Insurance Trust elected each of the ten nominees for the trustees to the Board of Trustees of Columbia Funds Variable Insurance Trust, each
to hold office until he or she dies, resigns or is removed or, if sooner, until the next meeting of shareholders called for the purpose of electing trustees and until the election and qualification of his or her
successor, as follows:
| Trustee | Votes For | Votes Withheld | Abstentions |
| Janet L. Carrig | 26,231,108,809 | 1,129,334,152 | 0 |
| J. Kevin Connaughton | 26,249,644,638 | 1,110,798,323 | 0 |
| Olive Darragh | 26,323,990,658 | 1,036,452,304 | 0 |
| Douglas A. Hacker | 26,255,762,920 | 1,104,680,042 | 0 |
| Nancy T. Lukitsh | 26,332,381,722 | 1,028,061,240 | 0 |
| David M. Moffett | 26,252,719,395 | 1,107,723,567 | 0 |
| John J. Neuhauser | 26,222,694,456 | 1,137,748,505 | 0 |
| Christopher O. Petersen | 26,265,703,212 | 1,094,739,749 | 0 |
| Patrick J. Simpson | 26,222,908,024 | 1,137,534,938 | 0 |
| Natalie A. Trunow | 26,340,164,732 | 1,020,278,229 | 0 |
| 28 | Columbia Variable Portfolio – Small Company Growth Fund | Semiannual Report 2020 |
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Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 225 Franklin Street, Boston, MA
02110-2804
© 2020 Columbia Management Investment
Advisers, LLC.
C-1510 AP (8/20)
Columbia Variable
Portfolio – Small Cap Value Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
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Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which Columbia Variable Portfolio – Small Cap Value Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov.
Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge
by visiting columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT, and for reporting periods ended prior to March 31, 2019, on Form N-Q. The Fund’s Form N-Q and Form N-PORT
filings are available on the SEC’s website at sec.gov. The Fund’s complete schedule of portfolio holdings, as filed on Form N-Q or Form N-PORT, can also be obtained without charge, upon request, by calling
800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
225 Franklin Street
Boston, MA 02110
Fund distributor
Columbia Management Investment Distributors,
Inc.
225 Franklin Street
Boston, MA 02110
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Columbia Variable Portfolio – Small Cap Value
Fund | Semiannual Report 2020
Fund at a Glance
(Unaudited)
(Unaudited)
Investment objective
The Fund
seeks long-term capital appreciation.
Portfolio management
Jeremy Javidi, CFA
Portfolio Manager
Managed Fund since 2005
| Columbia Variable Portfolio – Small Cap Value Fund | Semiannual Report 2020 | 3 |
Fund at a Glance (continued)
(Unaudited)
(Unaudited)
| 4 | Columbia Variable Portfolio – Small Cap Value Fund | Semiannual Report 2020 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount 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 $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
| January 1, 2020 — June 30, 2020 | |||||||
| Account value at the beginning of the period ($) | Account value at the end of the period ($) | Expenses paid during the period ($) | Fund’s annualized expense ratio (%) | ||||
| Actual | Hypothetical | Actual | Hypothetical | Actual | Hypothetical | Actual | |
| Class 1 | 1,000.00 | 1,000.00 | 792.60 | 1,020.34 | 4.06 | 4.57 | 0.91 |
| Class 2 | 1,000.00 | 1,000.00 | 791.60 | 1,019.10 | 5.17 | 5.82 | 1.16 |
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 366.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
Had Columbia Management Investment
Advisers, LLC and/or certain of its affiliates not waived/reimbursed certain fees and expenses, account value at the end of the period would have been reduced.
| Columbia Variable Portfolio – Small Cap Value Fund | Semiannual Report 2020 | 5 |
Portfolio of Investments
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 6 | Columbia Variable Portfolio – Small Cap Value Fund | Semiannual Report 2020 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Small Cap Value Fund | Semiannual Report 2020 | 7 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 8 | Columbia Variable Portfolio – Small Cap Value Fund | Semiannual Report 2020 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Small Cap Value Fund | Semiannual Report 2020 | 9 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
| Money Market Funds 0.8% | ||
| Shares | Value ($) | |
| Columbia Short-Term Cash Fund, 0.253%(d),(e) | 4,072,056 | 4,072,056 |
| Total Money Market Funds (Cost $4,072,089) | 4,072,056 | |
| Total Investments in Securities (Cost: $599,226,014) | 514,369,432 | |
| Other Assets & Liabilities, Net | (1,601,644) | |
| Net Assets | 512,767,788 | |
Notes to Portfolio of
Investments
| (a) | Non-income producing investment. |
| (b) | Represents fair value as determined in good faith under procedures approved by the Board of Trustees. At June 30, 2020, the total value of these securities amounted to $98,142, which represents 0.02% of total net assets. |
| (c) | Valuation based on significant unobservable inputs. |
| (d) | The rate shown is the seven-day current annualized yield at June 30, 2020. |
| (e) | As defined in the Investment Company Act of 1940, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the period ended June 30, 2020 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.253% | ||||||||
| 8,853,077 | 63,256,305 | (68,037,498) | 172 | 4,072,056 | 2,738 | 25,544 | 4,072,056 | |
Abbreviation Legend
| ADR | American Depositary Receipt |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 10 | Columbia Variable Portfolio – Small Cap Value Fund | Semiannual Report 2020 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Fair value measurements (continued)
Under the direction of the Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
Under the direction of the Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at June 30, 2020:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Common Stocks | ||||
| Communication Services | 7,636,915 | — | — | 7,636,915 |
| Consumer Discretionary | 63,839,143 | — | — | 63,839,143 |
| Consumer Staples | 13,514,547 | — | — | 13,514,547 |
| Energy | 20,460,003 | — | 98,142 | 20,558,145 |
| Financials | 178,209,275 | — | — | 178,209,275 |
| Health Care | 16,606,908 | — | — | 16,606,908 |
| Industrials | 84,452,995 | — | — | 84,452,995 |
| Information Technology | 39,115,674 | — | — | 39,115,674 |
| Materials | 51,199,483 | — | — | 51,199,483 |
| Real Estate | 32,196,066 | — | — | 32,196,066 |
| Utilities | 2,968,225 | — | — | 2,968,225 |
| Total Common Stocks | 510,199,234 | — | 98,142 | 510,297,376 |
| Money Market Funds | 4,072,056 | — | — | 4,072,056 |
| Total Investments in Securities | 514,271,290 | — | 98,142 | 514,369,432 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The Fund does not hold any
significant investments (greater than one percent of net assets) categorized as Level 3.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Small Cap Value Fund | Semiannual Report 2020 | 11 |
Statement of Assets and Liabilities
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $595,153,925) | $510,297,376 |
| Affiliated issuers (cost $4,072,089) | 4,072,056 |
| Receivable for: | |
| Investments sold | 294,008 |
| Capital shares sold | 100,888 |
| Dividends | 600,883 |
| Expense reimbursement due from Investment Manager | 1,921 |
| Trustees’ deferred compensation plan | 95,941 |
| Total assets | 515,463,073 |
| Liabilities | |
| Payable for: | |
| Investments purchased | 2,072,208 |
| Capital shares purchased | 361,951 |
| Management services fees | 12,031 |
| Distribution and/or service fees | 1,766 |
| Service fees | 101,130 |
| Compensation of board members | 2,759 |
| Compensation of chief compliance officer | 39 |
| Other expenses | 47,460 |
| Trustees’ deferred compensation plan | 95,941 |
| Total liabilities | 2,695,285 |
| Net assets applicable to outstanding capital stock | $512,767,788 |
| Represented by | |
| Paid in capital | 592,780,888 |
| Total distributable earnings (loss) | (80,013,100) |
| Total - representing net assets applicable to outstanding capital stock | $512,767,788 |
| Class 1 | |
| Net assets | $250,947,414 |
| Shares outstanding | 20,208,440 |
| Net asset value per share | $12.42 |
| Class 2 | |
| Net assets | $261,820,374 |
| Shares outstanding | 21,268,382 |
| Net asset value per share | $12.31 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 12 | Columbia Variable Portfolio – Small Cap Value Fund | Semiannual Report 2020 |
Statement of Operations
Six Months Ended June 30, 2020 (Unaudited)
Six Months Ended June 30, 2020 (Unaudited)
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $5,743,047 |
| Dividends — affiliated issuers | 25,544 |
| Foreign taxes withheld | (35,568) |
| Total income | 5,733,023 |
| Expenses: | |
| Management services fees | 2,186,445 |
| Distribution and/or service fees | |
| Class 2 | 316,448 |
| Service fees | 269,128 |
| Compensation of board members | 10,098 |
| Custodian fees | 11,140 |
| Printing and postage fees | 46,445 |
| Audit fees | 15,715 |
| Legal fees | 6,460 |
| Compensation of chief compliance officer | 108 |
| Other | 12,846 |
| Total expenses | 2,874,833 |
| Fees waived or expenses reimbursed by Investment Manager and its affiliates | (270,179) |
| Total net expenses | 2,604,654 |
| Net investment income | 3,128,369 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | (23,587,699) |
| Investments — affiliated issuers | 2,738 |
| Foreign currency translations | (1,161) |
| Net realized loss | (23,586,122) |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | (107,247,391) |
| Investments — affiliated issuers | 172 |
| Foreign currency translations | (20) |
| Net change in unrealized appreciation (depreciation) | (107,247,239) |
| Net realized and unrealized loss | (130,833,361) |
| Net decrease in net assets resulting from operations | $(127,704,992) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Columbia Variable Portfolio – Small Cap Value Fund | Semiannual Report 2020 | 13 |
Statement of Changes in Net Assets
| Six Months Ended June 30, 2020 (Unaudited) | Year Ended December 31, 2019 | |
| Operations | ||
| Net investment income | $3,128,369 | $2,535,826 |
| Net realized gain (loss) | (23,586,122) | 23,050,204 |
| Net change in unrealized appreciation (depreciation) | (107,247,239) | 51,584,475 |
| Net increase (decrease) in net assets resulting from operations | (127,704,992) | 77,170,505 |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class 1 | — | (535,774) |
| Class 2 | — | (27,808,189) |
| Total distributions to shareholders | — | (28,343,963) |
| Increase in net assets from capital stock activity | 8,721,268 | 292,643,666 |
| Total increase (decrease) in net assets | (118,983,724) | 341,470,208 |
| Net assets at beginning of period | 631,751,512 | 290,281,304 |
| Net assets at end of period | $512,767,788 | $631,751,512 |
| Six Months Ended | Year Ended | |||
| June 30, 2020 (Unaudited) | December 31, 2019 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 429,374 | 4,600,991 | 19,898,420 | 293,885,795 |
| Distributions reinvested | — | — | 36,422 | 535,774 |
| Redemptions | (421,275) | (4,991,537) | (122,954) | (1,845,073) |
| Net increase (decrease) | 8,099 | (390,546) | 19,811,888 | 292,576,496 |
| Class 2 | ||||
| Subscriptions | 2,364,060 | 26,687,764 | 1,352,923 | 20,253,011 |
| Distributions reinvested | — | — | 1,903,367 | 27,808,189 |
| Redemptions | (1,365,701) | (17,575,950) | (3,156,935) | (47,994,030) |
| Net increase | 998,359 | 9,111,814 | 99,355 | 67,170 |
| Total net increase | 1,006,458 | 8,721,268 | 19,911,243 | 292,643,666 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 14 | Columbia Variable Portfolio – Small Cap Value Fund | Semiannual Report 2020 |
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| Columbia Variable Portfolio – Small Cap Value Fund | Semiannual Report 2020 | 15 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income | Net realized and unrealized gain (loss) | Total from investment operations | Distributions from net investment income | Distributions from net realized gains | Total distributions to shareholders | |
| Class 1 | |||||||
| Six Months Ended 6/30/2020 (Unaudited) | $15.67 | 0.08 | (3.33) | (3.25) | — | — | — |
| Year Ended 12/31/2019 | $14.22 | 0.15 | 2.79 | 2.94 | (0.09) | (1.40) | (1.49) |
| Year Ended 12/31/2018 | $20.30 | 0.10 | (3.12) | (3.02) | (0.08) | (2.98) | (3.06) |
| Year Ended 12/31/2017 | $19.11 | 0.08 | 2.52 | 2.60 | (0.10) | (1.31) | (1.41) |
| Year Ended 12/31/2016 | $16.02 | 0.10 | 4.82 | 4.92 | (0.11) | (1.72) | (1.83) |
| Year Ended 12/31/2015 | $18.42 | 0.10 | (1.15) | (1.05) | (0.15) | (1.20) | (1.35) |
| Class 2 | |||||||
| Six Months Ended 6/30/2020 (Unaudited) | $15.55 | 0.07 | (3.31) | (3.24) | — | — | — |
| Year Ended 12/31/2019 | $14.12 | 0.08 | 2.79 | 2.87 | (0.04) | (1.40) | (1.44) |
| Year Ended 12/31/2018 | $20.17 | 0.05 | (3.08) | (3.03) | (0.04) | (2.98) | (3.02) |
| Year Ended 12/31/2017 | $19.01 | 0.03 | 2.50 | 2.53 | (0.06) | (1.31) | (1.37) |
| Year Ended 12/31/2016 | $15.94 | 0.06 | 4.80 | 4.86 | (0.07) | (1.72) | (1.79) |
| Year Ended 12/31/2015 | $18.33 | 0.06 | (1.14) | (1.08) | (0.11) | (1.20) | (1.31) |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Annualized. |
| (d) | Ratios include interfund lending expense which is less than 0.01%. |
| (e) | Ratios include line of credit interest expense which is less than 0.01%. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 16 | Columbia Variable Portfolio – Small Cap Value Fund | Semiannual Report 2020 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Six Months Ended 6/30/2020 (Unaudited) | $12.42 | (20.74%) | 1.01%(c) | 0.91%(c) | 1.36%(c) | 38% | $250,947 |
| Year Ended 12/31/2019 | $15.67 | 21.34% | 1.04%(d) | 0.92%(d) | 1.00% | 60% | $316,513 |
| Year Ended 12/31/2018 | $14.22 | (18.01%) | 1.05% | 0.92% | 0.51% | 49% | $5,525 |
| Year Ended 12/31/2017 | $20.30 | 14.31% | 1.01%(e) | 0.93%(e) | 0.41% | 52% | $7,186 |
| Year Ended 12/31/2016 | $19.11 | 33.04% | 0.98% | 0.93% | 0.60% | 62% | $6,081 |
| Year Ended 12/31/2015 | $16.02 | (6.12%) | 0.98% | 0.93% | 0.56% | 64% | $6,045 |
| Class 2 | |||||||
| Six Months Ended 6/30/2020 (Unaudited) | $12.31 | (20.84%) | 1.26%(c) | 1.16%(c) | 1.12%(c) | 38% | $261,820 |
| Year Ended 12/31/2019 | $15.55 | 20.98% | 1.31%(d) | 1.17%(d) | 0.52% | 60% | $315,238 |
| Year Ended 12/31/2018 | $14.12 | (18.17%) | 1.30% | 1.17% | 0.26% | 49% | $284,756 |
| Year Ended 12/31/2017 | $20.17 | 13.98% | 1.26%(e) | 1.18%(e) | 0.14% | 52% | $374,640 |
| Year Ended 12/31/2016 | $19.01 | 32.74% | 1.23% | 1.18% | 0.37% | 62% | $398,105 |
| Year Ended 12/31/2015 | $15.94 | (6.32%) | 1.23% | 1.18% | 0.32% | 64% | $320,184 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Small Cap Value Fund | Semiannual Report 2020 | 17 |
Notes to Financial Statements
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Note 1. Organization
Columbia Variable Portfolio
– Small Cap Value Fund (the Fund), a series of Columbia Funds Variable Insurance Trust (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940
Act), as an open-end management investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1 and Class 2 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued by
affiliated and unaffiliated life insurance companies (Participating Insurance Companies) as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors (Qualified
Investors) authorized by Columbia Management Investment Distributors, Inc. (the Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by participating in a Qualified Plan or by
buying a Contract and making allocations to the Fund. Although all share classes generally have identical voting, dividend and liquidation rights, each share class votes separately when required by the Trust’s
organizational documents or by law. Different share classes pay different net investment income distribution amounts to the extent the expenses of such share classes differ, and distributions in liquidation will be
proportional to the net asset value of each share class. Each share class has its own cost structure and other features.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on any
exchange are valued at the mean between the closing bid and asked prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Foreign equity securities are
valued based on the closing price on the foreign exchange in which such securities are primarily traded. If any foreign equity security closing prices are not readily available, the securities are valued at the mean
of the latest quoted bid and ask prices on such exchanges or markets. Foreign currency exchange rates are determined at the scheduled closing time of the New York Stock Exchange. Many securities markets and exchanges
outside the U.S. close prior to the close of the New York Stock Exchange; therefore, the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but
before the close of the New York Stock Exchange. In those situations, foreign securities will be fair valued pursuant to a policy adopted by the Board of Trustees. Under the policy, the Fund may utilize a third-party
pricing service to determine these fair values. The third-party pricing service takes into account multiple factors, including, but not limited to, movements in the U.S. securities markets, certain depositary
receipts, futures contracts and foreign exchange rates that have occurred subsequent to the close of the foreign exchange or market, to determine a good faith estimate that reasonably reflects the current market
conditions as of the close of the New York Stock Exchange. The fair value of a security is likely to be different from the quoted or published price, if available.
Investments in open-end investment
companies (other than ETFs), are valued at the latest net asset value reported by those companies as of the valuation time.
| 18 | Columbia Variable Portfolio – Small Cap Value Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Foreign currency transactions and
translations
The values of all assets and
liabilities denominated in foreign currencies are generally translated into U.S. dollars at exchange rates determined at the close of regular trading on the New York Stock Exchange. Net realized and unrealized gains
(losses) on foreign currency transactions and translations include gains (losses) arising from the fluctuation in exchange rates between trade and settlement dates on securities transactions, gains (losses) arising
from the disposition of foreign currency and currency gains (losses) between the accrual and payment dates on dividends, interest income and foreign withholding taxes.
For financial statement purposes,
the Fund does not distinguish that portion of gains (losses) on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations
are included with the net realized and unrealized gains (losses) on investments in the Statement of Operations.
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Corporate actions and dividend
income are generally recorded net of any non-reclaimable tax withholdings, on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a
proportionate change in return of capital to shareholders.
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
| Columbia Variable Portfolio – Small Cap Value Fund | Semiannual Report 2020 | 19 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund intends to qualify each
year as a regulated investment company under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its investment company taxable income and net capital gain, if any, for its
tax year, and as such will not be subject to federal income taxes. In addition, because the Fund meets the exception under Internal Revenue Code Section 4982(f), the Fund expects not to be subject to federal excise
tax. Therefore, no federal income or excise tax provision is recorded.
Foreign taxes
The Fund may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable, based upon its current interpretation of tax rules
and regulations that exist in the markets in which it invests.
Realized gains in certain countries
may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The
amount, if any, is disclosed as a liability on the Statement of Assets and Liabilities.
Distributions to subaccounts
Distributions to the subaccounts of
Contracts, Qualified Plans and Qualified Investors are recorded at the close of business on the record date and are payable on the first business day following the record date. Dividends from net investment income, if
any, are declared and distributed annually. Capital gain distributions, when available, will be made annually. However, an additional capital gain distribution may be made during the fiscal year in order to comply
with the Internal Revenue Code, as applicable to registered investment companies. Income distributions and capital gain distributions are determined in accordance with federal income tax regulations, which may differ
from GAAP. All dividends and distributions are reinvested in additional shares of the applicable share class of the Fund at the net asset value as of the ex-dividend date of the distribution.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The management services fee is an annual fee that is equal to a percentage of the
Fund’s daily net assets that declines from 0.87% to 0.75% as the Fund’s net assets increase. The annualized effective management services fee rate for the six months ended June 30, 2020 was 0.87% of the
Fund’s average daily net assets.
| 20 | Columbia Variable Portfolio – Small Cap Value Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. These members of the Board of Trustees
may participate in a Deferred Compensation Plan (the Deferred Plan) which may be terminated at any time. Obligations of the Deferred Plan will be paid solely out of the Fund’s assets, and all amounts payable
under the Deferred Plan constitute a general unsecured obligation of the Fund.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The annualized
effective service fee rate for the six months ended June 30, 2020, was 0.11% of the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. The Board of Trustees has approved, and the Fund has adopted, a distribution plan
(the Plan) which sets the distribution fees for the Fund. These fees are calculated daily and are intended to compensate the Distributor for selling shares of the Fund. The Fund pays a monthly distribution fee to the
Distributor at the maximum annual rate of 0.25% of the average daily net assets attributable to Class 2 shares of the Fund. The Fund pays no distribution and service fees for Class 1 shares.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft charges from the Fund’s
custodian, do not exceed the following annual rate(s) as a percentage of the class’ average daily net assets:
| May 1, 2020 through April 30, 2021 | Prior to May 1, 2020 | |
| Class 1 | 0.88% | 0.92% |
| Class 2 | 1.13 | 1.17 |
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and
brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short,
| Columbia Variable Portfolio – Small Cap Value Fund | Semiannual Report 2020 | 21 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
inverse floater program fees and expenses,
transaction charges and interest on borrowed money, interest, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This agreement may be
modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements described above are
not recoverable by the Investment Manager or its affiliates in future periods.
Note 4. Federal tax
information
The timing and character of
income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP because of temporary or permanent book to tax differences.
At June 30, 2020, the approximate
cost of all investments for federal income tax purposes and the aggregate gross approximate unrealized appreciation and depreciation based on that cost was:
| Federal tax cost ($) | Gross unrealized appreciation ($) | Gross unrealized (depreciation) ($) | Net unrealized (depreciation) ($) |
| 599,226,000 | 33,895,000 | (118,752,000) | (84,857,000) |
Tax cost of investments and
unrealized appreciation/(depreciation) may also include timing differences that do not constitute adjustments to tax basis.
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Note 5. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $215,575,670 and $196,996,839, respectively, for the six months ended June 30, 2020. The amount of purchase
and sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 6. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes referred to
as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 7. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund did not borrow or lend
money under the Interfund Program during the six months ended June 30, 2020.
| 22 | Columbia Variable Portfolio – Small Cap Value Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Note 8. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by Citibank, N.A., HSBC Bank USA, N.A. and JPMorgan Chase Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. The credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment Manager or an affiliated investment manager, severally and
not jointly, permits collective borrowings up to $1 billion. Interest is charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the
one-month LIBOR rate and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a
commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The commitment fee is included in other expenses in the Statement of Operations. This agreement
expires annually in December unless extended or renewed.
The Fund had no borrowings during
the six months ended June 30, 2020.
Note 9. Significant
risks
Financial sector risk
The Fund may be more susceptible to
the particular risks that may affect companies in the financial services sector than if it were invested in a wider variety of companies in unrelated sectors. Companies in the financial services sector are subject to
certain risks, including the risk of regulatory change, decreased liquidity in credit markets and unstable interest rates. Such companies may have concentrated portfolios, such as a high level of loans to real estate
developers, which makes them vulnerable to economic conditions that affect that industry. Performance of such companies may be affected by competitive pressures and exposure to investments, agreements and
counterparties, including credit products that, under certain circumstances, may lead to losses (e.g., subprime loans). Companies in the financial services sector are subject to extensive governmental regulation that
may limit the amount and types of loans and other financial commitments they can make, and interest rates and fees that they may charge. In addition, profitability of such companies is largely dependent upon the
availability and the cost of capital.
Market and environment risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The Fund performance may also be
significantly negatively impacted by the economic impact of the coronavirus disease 2019 (COVID-19) pandemic. Public health crisis has become a pandemic that has resulted in, and may continue to result in, significant
global economic and societal disruption and market volatility due to disruptions in market access, resource availability, facilities operations, imposition of tariffs, export controls and supply chain disruption,
among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement and loss in human and other resources. The uncertainty surrounding the magnitude, duration,
reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as
the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and pandemics that may arise in the future – could negatively affect global economies and markets
in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks
| Columbia Variable Portfolio – Small Cap Value Fund | Semiannual Report 2020 | 23 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
and epidemics in emerging market countries may be
greater due to generally less established healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic
risks in certain countries or globally. The disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively impact the Fund’s ability to
achieve their investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of the Fund.
The Investment Manager and its
affiliates have systematically implemented strategies to address the operating environment spurred by the COVID-19 pandemic. To promote the safety and security of our employees and to assure the continuity of our
business operations, we have implemented a work from home protocol for virtually all of our employee population, restricted business travel, and provided resources for complying with the guidance from the World Health
Organization, the U.S. Centers for Disease Control and governments. Our operations teams seek to operate without significant disruptions in service. Our pandemic strategy takes into consideration that a pandemic could
be widespread and may occur in multiple waves, affecting different communities at different times with varying levels of severity. We cannot, however, predict the impact that natural or man-made disasters, including
the COVID-19 pandemic, may have on the ability of our employees and third-party service providers to continue ordinary business operations and technology functions over near- or longer-term periods.
Shareholder concentration risk
At June 30, 2020, two unaffiliated
shareholders of record owned 39.9% of the outstanding shares of the Fund in one or more accounts. The Fund has no knowledge about whether any portion of those shares was owned beneficially. Affiliated shareholders of
record owned 48.2% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the Fund. In the case
of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of less liquid
positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Small- and mid-cap company risk
Investments in small- and
mid-capitalization companies (small- and mid-cap companies) often involve greater risks than investments in larger, more established companies (larger companies) because small- and mid-cap companies tend to have less
predictable earnings and may lack the management experience, financial resources, product diversification and competitive strengths of larger companies. Securities of small- and mid-cap companies may be less liquid
and more volatile than the securities of larger companies.
Note 10. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 11. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to
| 24 | Columbia Variable Portfolio – Small Cap Value Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
estimate the possible loss or range of loss that
may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated
financial condition or results of operations of Ameriprise Financial.
| Columbia Variable Portfolio – Small Cap Value Fund | Semiannual Report 2020 | 25 |
Liquidity Risk
Management Program
Pursuant to Rule 22e-4 under the
1940 Act, the Fund has adopted a liquidity risk management program (Program). The Program’s principal objectives include assessing, managing and periodically reviewing the Fund’s liquidity risk. Liquidity
risk is defined as the risk that the Fund could not meet redemption requests without significant dilution of remaining investors’ interests in the Fund.
The Board has appointed the
Investment Manager as the program administrator for the Fund’s Program. The Investment Manager has delegated oversight of the Program to its Liquidity Risk Management Committee (the Committee). At a board
meeting during the fiscal period, the Committee provided the Board with a report addressing the operations of the program and assessing its adequacy and effectiveness of implementation for the period December 1, 2018,
through December 31, 2019, including:
| • | the Fund had sufficient liquidity to both meet redemptions and operate effectively on behalf of shareholders; |
| • | there were no material changes to the Program during the period; |
| • | the implementation of the Program was effective to manage the Fund’s liquidity risk; and |
| • | the Program operated adequately during the period. |
There can be no assurance that the
Program will achieve its objectives in the future. Please refer to the Fund’s prospectus for more information regarding the Fund’s exposure to liquidity risk and other principal risks to which an
investment in the Fund may be subject.
Board Consideration
and Approval of Management
Agreement
On June 17, 2020, the Board of
Trustees (the Board) and the Trustees who are not interested persons (as defined in the Investment Company Act of 1940) (the Independent Trustees) of Columbia Funds Variable Insurance Trust (the Trust) unanimously
approved the continuation of the Management Agreement (the Management Agreement) with Columbia Management Investment Advisers, LLC (the Investment Manager) with respect to Columbia Variable Portfolio – Small Cap
Value Fund (the Fund), a series of the Trust. As detailed below, the Board’s Advisory Fees and Expenses Committee (the Committee) and the Board met on multiple occasions to review and discuss, among themselves,
with the management team of the Investment Manager and with an independent fee consultant, materials provided by the Investment Manager, the independent fee consultant and others before determining to approve the
continuation of the Management Agreement.
In connection with their
deliberations regarding the continuation of the Management Agreement, the Committee and the Board evaluated materials requested from the Investment Manager regarding the Fund and the Management Agreement, and
discussed these materials with representatives of the Investment Manager at Committee meetings held on March 10, 2020, April 30, 2020 and June 17, 2020 and at Board meetings held on March 11, 2020 and June 17, 2020.
In addition, the Board and its various committees consider matters bearing on the Management Agreement at other meetings throughout the year and in prior years and meet regularly with senior management of the Trust
and the Investment Manager. Through the Board’s Investment Oversight Committees, Trustees also meet with selected portfolio managers of the funds the Trustees oversee and with other investment personnel at
various times throughout the year. The Committee and the Board also consulted with the independent fee consultant, Fund counsel and the Independent Trustees’ independent legal counsel, who advised on various
matters with respect to the Committee’s and the Board’s considerations and otherwise assisted the Committee and the Board in their deliberations. On June 17, 2020, the Committee recommended that the Board
approve the continuation of the Management Agreement. On June 17, 2020, the Board, including the Independent Trustees, voting separately, unanimously approved the continuation of the Management Agreement for the
Fund.
| 26 | Columbia Variable Portfolio – Small Cap Value Fund | Semiannual Report 2020 |
Board Consideration and Approval of
Management
Agreement (continued)
The Committee and the Board considered all
information that they, their legal counsel or the Investment Manager believed reasonably necessary to evaluate and to determine whether to recommend for approval or approve the continuation of the Management
Agreement. The information and factors considered by the Committee and the Board in recommending for approval or approving the continuation of the Management Agreement for the Fund included the following:
| • | Information on the investment performance of the Fund relative to the performance of a group of mutual funds determined to be comparable to the Fund by the Investment Manager, as well as performance relative to benchmarks; |
| • | Information on the Fund’s management fees and total expenses, including information comparing the Fund’s expenses to those of a group of comparable mutual funds, as determined by the Investment Manager; |
| • | The Investment Manager’s agreement to contractually limit or cap total operating expenses for the Fund through April 30, 2021 so that total operating expenses (excluding certain fees and expenses, such as transaction costs and certain other investment related expenses, interest, taxes, acquired fund fees and expenses, and infrequent and/or unusual expenses) would not exceed a specified annual rate, as a percentage of the Fund’s net assets; |
| • | The terms and conditions of the Management Agreement; |
| • | The current and proposed terms and conditions of other agreements and arrangements with affiliates of the Investment Manager relating to the operations of the Fund, including agreements with respect to the provision of distribution, transfer agency and shareholder services to the Fund; |
| • | Descriptions of various functions performed by the Investment Manager under the Management Agreement, including portfolio management and portfolio trading practices; |
| • | Information regarding any recently negotiated management fees of similarly-managed portfolios of other institutional clients of the Investment Manager; |
| • | Information regarding the reputation, regulatory history and resources of the Investment Manager, including information regarding senior management, portfolio managers and other personnel; |
| • | Information regarding the capabilities of the Investment Manager with respect to compliance monitoring services, including an assessment of the Investment Manager’s compliance system by the Fund’s Chief Compliance Officer; and |
| • | The profitability to the Investment Manager and its affiliates from their relationships with the Fund. |
Nature, extent and quality of
services provided under the Management Agreement
The Committee and the Board
considered the nature, extent and quality of services provided to the Fund by the Investment Manager and its affiliates under the Management Agreement and under separate agreements for the provision of transfer agency
and shareholder services, and the resources dedicated to the Fund and the other Columbia Funds by the Investment Manager and its affiliates. The Committee and the Board considered, among other things, the Investment
Manager’s ability to attract, motivate and retain highly qualified research, advisory and supervisory investment professionals (including compensation programs for personnel involved in fund management,
reputation and other attributes), the portfolio management services provided by those investment professionals, and the quality of the Investment Manager’s investment research capabilities and trade execution
services. The Committee and the Board also considered the potential benefits to shareholders of investing in a mutual fund that is part of a fund complex offering exposure to a variety of asset classes and investment
disciplines and providing a variety of fund and shareholder services.
The Committee and the Board also
considered the professional experience and qualifications of the senior personnel of the Investment Manager, which included consideration of the Investment Manager’s experience with funds using an investment
strategy similar to that used by the Investment Manager for the Fund. The Committee and the Board noted the compliance programs of and the compliance-related resources provided to the Fund by the Investment Manager
and its affiliates and the resources dedicated by the Investment Manager and its affiliates to risk management, and considered the Investment Manager’s ability to provide administrative services to the Fund and
coordinate the activities of the Fund’s other service
| Columbia Variable Portfolio – Small Cap Value Fund | Semiannual Report 2020 | 27 |
Board Consideration and Approval of
Management
Agreement (continued)
providers. After reviewing these and related
factors, the Committee and the Board concluded, within the context of their overall conclusions, that the nature, extent and quality of the services provided to the Fund under the Management Agreement supported the
continuation of the Management Agreement.
Investment performance
The Committee and the Board
reviewed information about the performance of the Fund over various time periods, including performance information relative to benchmarks, information that compared the performance of the Fund to the performance of a
group of comparable mutual funds as determined by the Investment Manager, and information and analysis provided by the independent fee consultant. The Committee and the Board also reviewed a description of the
Investment Manager’s methodology for identifying the Fund’s peer groups for purposes of performance and expense comparisons. Although the Fund’s performance lagged that of a relevant peer group for
certain (although not necessarily all) periods, the Committee and the Board concluded that other factors relevant to performance were sufficient, in light of other considerations, to support continuation of the
Management Agreement. Those factors included one or more of the following: (i) that the Fund’s performance, although lagging in certain recent periods, was stronger over the longer term; (ii) that the
underperformance was attributable, to a significant extent, to investment decisions that were reasonable and consistent with the Fund’s investment strategy and policies and that the Fund was performing within a
reasonable range of expectations, given those investment decisions, market conditions and the Fund’s investment strategy; (iii) that the Fund’s performance was competitive when compared to other relevant
performance benchmarks or peer groups; and (iv) that the Investment Manager had taken or was taking steps designed to help improve the Fund’s investment performance, including, but not limited to, replacing
portfolio managers, enhancing the resources supporting the portfolio managers, or modifying investment strategies.
The Committee and the Board noted
that, through December 31, 2019, the Fund’s performance was in the seventy-first, fifty-third and twenty-fourth percentile (where the best performance would be in the first percentile) of its category selected
by the Investment Manager for the purposes of performance comparisons for the one-, three- and five-year periods, respectively.
The Committee and the Board also
considered the Investment Manager’s performance and reputation generally, the Investment Manager’s historical responsiveness to Board concerns about performance, and the Investment Manager’s
willingness to take steps intended to improve performance. After reviewing these and related factors, the Committee and the Board concluded, within the context of their overall conclusions, that the performance of the
Fund and the Investment Manager was sufficient, in light of other considerations, to support the continuation of the Management Agreement.
Investment management fee rates
and other expenses
The Committee and the Board
considered the management fees charged to the Fund under the Management Agreement as well as the total expenses incurred by the Fund. In assessing the reasonableness of the fees under the Management Agreement, the
Committee and the Board considered, among other information, the Fund’s total expense ratio as a percentage of average daily net assets. The Committee and the Board considered data provided by the Investment
Manager and the independent fee consultant. The Committee and the Board noted that, as of December 31, 2019, the Fund’s actual management fee and net total expense ratio were ranked in the second and third
quintiles, respectively, (where the lowest fees and expenses would be in the first quintile) against the Fund’s expense universe as determined by the Investment Manager for purposes of expense comparison. The
Committee and the Board also took into account the fee waiver and expense limitation arrangements agreed to by the Investment Manager, as noted above.
The Committee and the Board also
received and considered information about the management fees charged by the Investment Manager to institutional accounts. In considering the fees charged to those accounts, the Committee and the Board took into
account, among other things, the Investment Manager’s representations about the differences between managing mutual funds as compared to other types of accounts, including differences in the services provided,
differences in the risk profile of such business for the Investment Manager and the additional resources required to manage mutual funds effectively. The Committee and the Board also received and considered
information about the fees charged by the Investment Manager for sub-advisory services it provides to comparable unaffiliated funds. In evaluating the Fund’s management fees, the Committee and the Board also
took into account the demands, complexity and quality of the investment management of the Fund.
| 28 | Columbia Variable Portfolio – Small Cap Value Fund | Semiannual Report 2020 |
Board Consideration and Approval of
Management
Agreement (continued)
After reviewing these and related factors, the
Committee and the Board concluded, within the context of their overall conclusions, that the management fee rates and expenses of the Fund, in light of other considerations, supported the continuation of the
Management Agreement.
Costs of services provided and
profitability
The Committee and the Board also
took note of the costs the Investment Manager and its affiliates incur in connection with the services provided and the profitability to the Investment Manager and its affiliates from their relationships with the
Fund, and the efforts undertaken by the Investment Manager and its affiliates to manage efficiently their costs to provide such services.
The Committee and the Board also
considered the compensation directly or indirectly received by the Investment Manager’s affiliates in connection with their relationships with the Fund. The Committee and the Board reviewed information provided
by management as to the profitability to the Investment Manager and its affiliates of their relationships with the Fund, information about the allocation of expenses used to calculate profitability, and comparisons of
profitability levels realized in 2019 to profitability levels realized in 2018. When reviewing profitability, the Committee and the Board also considered court cases in which adviser profitability was an issue in
whole or in part, the performance of similarly managed funds, the performance of the Fund, and the expense ratio of the Fund. In addition, the Committee and the Board considered information provided by the Investment
Manager regarding the Investment Manager’s financial condition and comparing its profitability to that of other asset management firms that are, or are subsidiaries of, publicly traded companies. In this regard,
the Committee and the Board also considered data provided by the independent fee consultant.
After reviewing these and related
factors, the Committee and the Board concluded, within the context of their overall conclusions, that the costs of services provided and the profitability to the Investment Manager and its affiliates from their
relationships with the Fund supported the continuation of the Management Agreement.
Economies of scale
The Committee and the Board
considered the potential existence of economies of scale in the provision by the Investment Manager of services to the Fund, to groups of related funds, and to the Investment Manager’s investment advisory
clients as a whole, and whether those economies of scale were shared with the Fund through breakpoints in investment management fees or other means, such as expense limitation arrangements and additional investments
by the Investment Manager in investment, trading, compliance and other resources. The Committee and the Board noted that the management fee schedules for the Fund contained breakpoints that would reduce the fee rate
on assets above specified threshold levels.
In considering these matters, the
Committee and the Board also considered the costs of the services provided and the profitability to the Investment Manager and its affiliates from their relationships with the Fund, as noted above. After reviewing
these and related factors, the Committee and the Board concluded, within the context of their overall conclusions, that the extent to which any economies of scale were expected to be shared with the Fund supported the
continuation of the Management Agreement.
Other benefits to the Investment
Manager
The Committee and the Board
received and considered information regarding “fall-out” or ancillary benefits received by the Investment Manager and its affiliates as a result of their relationships with the Fund, such as the engagement
of the Investment Manager’s affiliates to provide distribution, transfer agency and shareholder services to the Fund. In this regard, among other matters, the Committee and the Board considered that the
Fund’s distributor retains a portion of the distribution fees from the Fund. The Committee and the Board also considered the benefits of research made available to the Investment Manager by reason of brokerage
commissions generated by the Fund’s securities transactions, and reviewed information about the Investment Manager’s practices with respect to considering brokerage and research services when allocating
portfolio transactions. In this connection, the Board also noted that the amount of research made available to the Investment Manager by reason of brokerage commissions had been declining over time, and may decline
further. The Committee and the Board recognized that the Investment Manager’s profitability would be somewhat lower without these benefits.
| Columbia Variable Portfolio – Small Cap Value Fund | Semiannual Report 2020 | 29 |
Board Consideration and Approval of
Management
Agreement (continued)
Conclusion
The Committee and the Board
reviewed all of the above considerations in reaching their decisions to recommend or approve the continuation of the Management Agreement. In their deliberations, the Trustees did not identify any particular
information that was all-important or controlling, and individual Trustees may have attributed different weights to the various factors. Based on their evaluation of all factors that they deemed to be material,
including those factors described above, and assisted by the advice of independent legal counsel, the Board, including the Independent Trustees, voting separately, unanimously approved the continuation of the
Management Agreement.
Results of Meeting of
Shareholders
At a Joint Special Meeting of
Shareholders held on April 16, 2020, shareholders of Columbia Funds Variable Insurance Trust elected each of the ten nominees for the trustees to the Board of Trustees of Columbia Funds Variable Insurance Trust, each
to hold office until he or she dies, resigns or is removed or, if sooner, until the next meeting of shareholders called for the purpose of electing trustees and until the election and qualification of his or her
successor, as follows:
| Trustee | Votes For | Votes Withheld | Abstentions |
| Janet L. Carrig | 26,231,108,809 | 1,129,334,152 | 0 |
| J. Kevin Connaughton | 26,249,644,638 | 1,110,798,323 | 0 |
| Olive Darragh | 26,323,990,658 | 1,036,452,304 | 0 |
| Douglas A. Hacker | 26,255,762,920 | 1,104,680,042 | 0 |
| Nancy T. Lukitsh | 26,332,381,722 | 1,028,061,240 | 0 |
| David M. Moffett | 26,252,719,395 | 1,107,723,567 | 0 |
| John J. Neuhauser | 26,222,694,456 | 1,137,748,505 | 0 |
| Christopher O. Petersen | 26,265,703,212 | 1,094,739,749 | 0 |
| Patrick J. Simpson | 26,222,908,024 | 1,137,534,938 | 0 |
| Natalie A. Trunow | 26,340,164,732 | 1,020,278,229 | 0 |
| 30 | Columbia Variable Portfolio – Small Cap Value Fund | Semiannual Report 2020 |
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Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 225 Franklin Street, Boston, MA
02110-2804
© 2020 Columbia Management Investment
Advisers, LLC.
C-1505 AP (8/20)
Columbia Variable
Portfolio – Contrarian Core Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
| 3 | |
| 5 | |
| 6 | |
| 10 | |
| 11 | |
| 12 | |
| 14 | |
| 16 | |
| 23 | |
| 23 | |
| 27 |
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which Columbia Variable Portfolio – Contrarian Core Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov.
Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge
by visiting columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT, and for reporting periods ended prior to March 31, 2019, on Form N-Q. The Fund’s Form N-Q and Form N-PORT
filings are available on the SEC’s website at sec.gov. The Fund’s complete schedule of portfolio holdings, as filed on Form N-Q or Form N-PORT, can also be obtained without charge, upon request, by calling
800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
225 Franklin Street
Boston, MA 02110
Fund distributor
Columbia Management Investment Distributors,
Inc.
225 Franklin Street
Boston, MA 02110
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Columbia Variable Portfolio – Contrarian Core
Fund | Semiannual Report 2020
Fund at a Glance
(Unaudited)
(Unaudited)
Investment objective
The Fund
seeks total return, consisting of long-term capital appreciation and current income.
Portfolio management
Guy Pope, CFA
Portfolio Manager
Managed Fund since 2012
| Columbia Variable Portfolio – Contrarian Core Fund | Semiannual Report 2020 | 3 |
Fund at a Glance (continued)
(Unaudited)
(Unaudited)
| 4 | Columbia Variable Portfolio – Contrarian Core Fund | Semiannual Report 2020 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount 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 $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
| January 1, 2020 — June 30, 2020 | |||||||
| Account value at the beginning of the period ($) | Account value at the end of the period ($) | Expenses paid during the period ($) | Fund’s annualized expense ratio (%) | ||||
| Actual | Hypothetical | Actual | Hypothetical | Actual | Hypothetical | Actual | |
| Class 1 | 1,000.00 | 1,000.00 | 985.40 | 1,021.43 | 3.41 | 3.47 | 0.69 |
| Class 2 | 1,000.00 | 1,000.00 | 984.00 | 1,020.19 | 4.64 | 4.72 | 0.94 |
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 366.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
Had Columbia Management Investment
Advisers, LLC and/or certain of its affiliates not waived/reimbursed certain fees and expenses, account value at the end of the period would have been reduced.
| Columbia Variable Portfolio – Contrarian Core Fund | Semiannual Report 2020 | 5 |
Portfolio of Investments
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 6 | Columbia Variable Portfolio – Contrarian Core Fund | Semiannual Report 2020 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Contrarian Core Fund | Semiannual Report 2020 | 7 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Notes to Portfolio of
Investments
| (a) | Non-income producing investment. |
| (b) | The rate shown is the seven-day current annualized yield at June 30, 2020. |
| (c) | As defined in the Investment Company Act of 1940, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the period ended June 30, 2020 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.253% | ||||||||
| 12,377,570 | 209,001,234 | (211,849,751) | — | 9,529,053 | 10,074 | 113,593 | 9,529,053 | |
Fair value
measurements
The Fund categorizes
its fair value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when
available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that
reflect the Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input
that is deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For
example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active
market.
Fair value inputs are
summarized in the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 8 | Columbia Variable Portfolio – Contrarian Core Fund | Semiannual Report 2020 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Fair value measurements (continued)
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at June 30, 2020:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Common Stocks | ||||
| Communication Services | 176,785,503 | — | — | 176,785,503 |
| Consumer Discretionary | 167,325,080 | — | — | 167,325,080 |
| Consumer Staples | 65,324,087 | — | — | 65,324,087 |
| Energy | 44,384,545 | — | — | 44,384,545 |
| Financials | 155,718,405 | — | — | 155,718,405 |
| Health Care | 179,026,373 | — | — | 179,026,373 |
| Industrials | 98,320,958 | — | — | 98,320,958 |
| Information Technology | 428,027,372 | — | — | 428,027,372 |
| Materials | 41,965,638 | — | — | 41,965,638 |
| Real Estate | 16,665,230 | — | — | 16,665,230 |
| Utilities | 22,644,687 | — | — | 22,644,687 |
| Total Common Stocks | 1,396,187,878 | — | — | 1,396,187,878 |
| Money Market Funds | 9,529,053 | — | — | 9,529,053 |
| Total Investments in Securities | 1,405,716,931 | — | — | 1,405,716,931 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Contrarian Core Fund | Semiannual Report 2020 | 9 |
Statement of Assets and Liabilities
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $1,078,738,401) | $1,396,187,878 |
| Affiliated issuers (cost $9,529,053) | 9,529,053 |
| Receivable for: | |
| Investments sold | 5,046,647 |
| Capital shares sold | 9,825 |
| Dividends | 1,570,546 |
| Foreign tax reclaims | 65,733 |
| Expense reimbursement due from Investment Manager | 1,964 |
| Trustees’ deferred compensation plan | 123,238 |
| Total assets | 1,412,534,884 |
| Liabilities | |
| Payable for: | |
| Investments purchased | 2,695,256 |
| Capital shares purchased | 2,795,791 |
| Management services fees | 27,472 |
| Distribution and/or service fees | 735 |
| Service fees | 6,328 |
| Compensation of board members | 3,753 |
| Compensation of chief compliance officer | 139 |
| Other expenses | 24,225 |
| Trustees’ deferred compensation plan | 123,238 |
| Total liabilities | 5,676,937 |
| Net assets applicable to outstanding capital stock | $1,406,857,947 |
| Represented by | |
| Trust capital | $1,406,857,947 |
| Total - representing net assets applicable to outstanding capital stock | $1,406,857,947 |
| Class 1 | |
| Net assets | $1,297,650,184 |
| Shares outstanding | 49,213,994 |
| Net asset value per share | $26.37 |
| Class 2 | |
| Net assets | $109,207,763 |
| Shares outstanding | 4,225,184 |
| Net asset value per share | $25.85 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 10 | Columbia Variable Portfolio – Contrarian Core Fund | Semiannual Report 2020 |
Statement of Operations
Six Months Ended June 30, 2020 (Unaudited)
Six Months Ended June 30, 2020 (Unaudited)
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $12,647,067 |
| Dividends — affiliated issuers | 113,593 |
| Foreign taxes withheld | (63,161) |
| Total income | 12,697,499 |
| Expenses: | |
| Management services fees | 5,102,535 |
| Distribution and/or service fees | |
| Class 2 | 130,524 |
| Service fees | 33,495 |
| Compensation of board members | 15,951 |
| Custodian fees | 6,736 |
| Printing and postage fees | 10,110 |
| Audit fees | 14,669 |
| Legal fees | 17,521 |
| Compensation of chief compliance officer | 262 |
| Other | 19,071 |
| Total expenses | 5,350,874 |
| Fees waived or expenses reimbursed by Investment Manager and its affiliates | (341,859) |
| Total net expenses | 5,009,015 |
| Net investment income | 7,688,484 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 38,507,872 |
| Investments — affiliated issuers | 10,074 |
| Foreign currency translations | 3,813 |
| Net realized gain | 38,521,759 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | (74,962,307) |
| Foreign currency translations | (1,346) |
| Net change in unrealized appreciation (depreciation) | (74,963,653) |
| Net realized and unrealized loss | (36,441,894) |
| Net decrease in net assets resulting from operations | $(28,753,410) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Columbia Variable Portfolio – Contrarian Core Fund | Semiannual Report 2020 | 11 |
Statement of Changes in Net Assets
| Six Months Ended June 30, 2020 (Unaudited) | Year Ended December 31, 2019 | |
| Operations | ||
| Net investment income | $7,688,484 | $17,172,229 |
| Net realized gain | 38,521,759 | 75,122,014 |
| Net change in unrealized appreciation (depreciation) | (74,963,653) | 335,016,025 |
| Net increase (decrease) in net assets resulting from operations | (28,753,410) | 427,310,268 |
| Decrease in net assets from capital stock activity | (110,568,720) | (274,808,345) |
| Total increase (decrease) in net assets | (139,322,130) | 152,501,923 |
| Net assets at beginning of period | 1,546,180,077 | 1,393,678,154 |
| Net assets at end of period | $1,406,857,947 | $1,546,180,077 |
| Six Months Ended | Year Ended | |||
| June 30, 2020 (Unaudited) | December 31, 2019 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 2,658,713 | 71,311,240 | 216,231 | 5,144,391 |
| Redemptions | (7,004,369) | (180,017,853) | (11,411,795) | (271,813,544) |
| Net decrease | (4,345,656) | (108,706,613) | (11,195,564) | (266,669,153) |
| Class 2 | ||||
| Subscriptions | 141,337 | 3,397,487 | 169,748 | 4,008,986 |
| Redemptions | (210,603) | (5,259,594) | (522,680) | (12,148,178) |
| Net decrease | (69,266) | (1,862,107) | (352,932) | (8,139,192) |
| Total net decrease | (4,414,922) | (110,568,720) | (11,548,496) | (274,808,345) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 12 | Columbia Variable Portfolio – Contrarian Core Fund | Semiannual Report 2020 |
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| Columbia Variable Portfolio – Contrarian Core Fund | Semiannual Report 2020 | 13 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income | Net realized and unrealized gain (loss) | Total from investment operations | |
| Class 1 | ||||
| Six Months Ended 6/30/2020 (Unaudited) | $26.76 | 0.14 | (0.53) | (0.39) |
| Year Ended 12/31/2019 | $20.10 | 0.27 | 6.39 | 6.66 |
| Year Ended 12/31/2018 | $22.07 | 0.24 | (2.21) | (1.97) |
| Year Ended 12/31/2017 | $18.12 | 0.21 | 3.74 | 3.95 |
| Year Ended 12/31/2016 | $16.67 | 0.20 | 1.25 | 1.45 |
| Year Ended 12/31/2015 | $16.19 | 0.54(e) | (0.06) | 0.48 |
| Class 2 | ||||
| Six Months Ended 6/30/2020 (Unaudited) | $26.27 | 0.11 | (0.53) | (0.42) |
| Year Ended 12/31/2019 | $19.78 | 0.21 | 6.28 | 6.49 |
| Year Ended 12/31/2018 | $21.77 | 0.19 | (2.18) | (1.99) |
| Year Ended 12/31/2017 | $17.92 | 0.16 | 3.69 | 3.85 |
| Year Ended 12/31/2016 | $16.53 | 0.16 | 1.23 | 1.39 |
| Year Ended 12/31/2015 | $16.09 | 0.58(f) | (0.14) | 0.44 |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Annualized. |
| (d) | Ratios include interfund lending expense which is less than 0.01%. |
| (e) | Net investment income per share includes special dividends. The effect of these dividends amounted to $0.40 per share. |
| (f) | Net investment income per share includes special dividends. The effect of these dividends amounted to $0.47 per share. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 14 | Columbia Variable Portfolio – Contrarian Core Fund | Semiannual Report 2020 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Six Months Ended 6/30/2020 (Unaudited) | $26.37 | (1.46%) | 0.74%(c) | 0.69%(c) | 1.11%(c) | 34% | $1,297,650 |
| Year Ended 12/31/2019 | $26.76 | 33.13% | 0.74%(d) | 0.70%(d) | 1.16% | 43% | $1,433,380 |
| Year Ended 12/31/2018 | $20.10 | (8.93%) | 0.71% | 0.71% | 1.09% | 63% | $1,301,755 |
| Year Ended 12/31/2017 | $22.07 | 21.80% | 0.72% | 0.72% | 1.04% | 46% | $2,383,772 |
| Year Ended 12/31/2016 | $18.12 | 8.70% | 0.76% | 0.76% | 1.18% | 53% | $2,216,643 |
| Year Ended 12/31/2015 | $16.67 | 2.97% | 0.75% | 0.75% | 3.29% | 67% | $2,278,481 |
| Class 2 | |||||||
| Six Months Ended 6/30/2020 (Unaudited) | $25.85 | (1.60%) | 0.99%(c) | 0.94%(c) | 0.86%(c) | 34% | $109,208 |
| Year Ended 12/31/2019 | $26.27 | 32.81% | 0.99%(d) | 0.95%(d) | 0.90% | 43% | $112,800 |
| Year Ended 12/31/2018 | $19.78 | (9.14%) | 0.96% | 0.96% | 0.86% | 63% | $91,923 |
| Year Ended 12/31/2017 | $21.77 | 21.49% | 0.97% | 0.97% | 0.78% | 46% | $110,867 |
| Year Ended 12/31/2016 | $17.92 | 8.41% | 1.01% | 1.01% | 0.94% | 53% | $82,790 |
| Year Ended 12/31/2015 | $16.53 | 2.73% | 1.01% | 1.01% | 3.52% | 67% | $55,892 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Contrarian Core Fund | Semiannual Report 2020 | 15 |
Notes to Financial Statements
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Note 1. Organization
Columbia Variable Portfolio
– Contrarian Core Fund (the Fund), a series of Columbia Funds Variable Insurance Trust (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940
Act), as an open-end management investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1 and Class 2 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued by
affiliated and unaffiliated life insurance companies (Participating Insurance Companies) as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors (Qualified
Investors) authorized by Columbia Management Investment Distributors, Inc. (the Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by participating in a Qualified Plan or by
buying a Contract and making allocations to the Fund. Although all share classes generally have identical voting, dividend and liquidation rights, each share class votes separately when required by the Trust’s
organizational documents or by law. Different share classes pay different net investment income distribution amounts to the extent the expenses of such share classes differ, and distributions in liquidation will be
proportional to the net asset value of each share class. Each share class has its own cost structure and other features.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on any
exchange are valued at the mean between the closing bid and asked prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Foreign equity securities are
valued based on the closing price on the foreign exchange in which such securities are primarily traded. If any foreign equity security closing prices are not readily available, the securities are valued at the mean
of the latest quoted bid and ask prices on such exchanges or markets. Foreign currency exchange rates are determined at the scheduled closing time of the New York Stock Exchange. Many securities markets and exchanges
outside the U.S. close prior to the close of the New York Stock Exchange; therefore, the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but
before the close of the New York Stock Exchange. In those situations, foreign securities will be fair valued pursuant to a policy adopted by the Board of Trustees. Under the policy, the Fund may utilize a third-party
pricing service to determine these fair values. The third-party pricing service takes into account multiple factors, including, but not limited to, movements in the U.S. securities markets, certain depositary
receipts, futures contracts and foreign exchange rates that have occurred subsequent to the close of the foreign exchange or market, to determine a good faith estimate that reasonably reflects the current market
conditions as of the close of the New York Stock Exchange. The fair value of a security is likely to be different from the quoted or published price, if available.
Investments in open-end investment
companies (other than ETFs), are valued at the latest net asset value reported by those companies as of the valuation time.
| 16 | Columbia Variable Portfolio – Contrarian Core Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Foreign currency transactions and
translations
The values of all assets and
liabilities denominated in foreign currencies are generally translated into U.S. dollars at exchange rates determined at the close of regular trading on the New York Stock Exchange. Net realized and unrealized gains
(losses) on foreign currency transactions and translations include gains (losses) arising from the fluctuation in exchange rates between trade and settlement dates on securities transactions, gains (losses) arising
from the disposition of foreign currency and currency gains (losses) between the accrual and payment dates on dividends, interest income and foreign withholding taxes.
For financial statement purposes,
the Fund does not distinguish that portion of gains (losses) on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations
are included with the net realized and unrealized gains (losses) on investments in the Statement of Operations.
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Corporate actions and dividend
income are generally recorded net of any non-reclaimable tax withholdings, on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a
proportionate change in return of capital to shareholders.
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
| Columbia Variable Portfolio – Contrarian Core Fund | Semiannual Report 2020 | 17 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund is treated as a
partnership for federal income tax purposes, and the Fund does not expect to make regular distributions. The Fund will not be subject to federal income tax, and therefore, there is no provision for federal income
taxes. The partners of the Fund are subject to tax on their distributive share of the Fund’s income and loss. The components of the Fund’s net assets are reported at the partner-level for federal income
tax purposes, and therefore, are not presented in the Statement of Assets and Liabilities.
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Foreign taxes
The Fund may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable, based upon its current interpretation of tax rules
and regulations that exist in the markets in which it invests.
Realized gains in certain countries
may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The
amount, if any, is disclosed as a liability on the Statement of Assets and Liabilities.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The management services fee is an annual fee that is equal to a percentage of the
Fund’s daily net assets that declines from 0.77% to 0.57% as the Fund’s net assets increase. The annualized effective management services fee rate for the six months ended June 30, 2020 was 0.72% of the
Fund’s average daily net assets.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. These members of the Board of Trustees
may participate in a Deferred Compensation Plan (the Deferred Plan) which may be terminated at any time. Obligations of the Deferred Plan will be paid solely out of the Fund’s assets, and all amounts payable
under the Deferred Plan constitute a general unsecured obligation of the Fund.
| 18 | Columbia Variable Portfolio – Contrarian Core Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The annualized
effective service fee rate for the six months ended June 30, 2020, was 0.00% of the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. The Board of Trustees has approved, and the Fund has adopted, a distribution plan
(the Plan) which sets the distribution fees for the Fund. These fees are calculated daily and are intended to compensate the Distributor for selling shares of the Fund. The Fund pays a monthly distribution fee to the
Distributor at the maximum annual rate of 0.25% of the average daily net assets attributable to Class 2 shares of the Fund. The Fund pays no distribution and service fees for Class 1 shares.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft charges from the Fund’s
custodian, do not exceed the following annual rate(s) as a percentage of the class’ average daily net assets:
| Fee rate(s) contractual through April 30, 2021 | |
| Class 1 | 0.69% |
| Class 2 | 0.94 |
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and
brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program fees and expenses, transaction charges and interest on borrowed
money, interest, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This agreement may be modified or amended only with approval from
the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements described above are not recoverable by the Investment Manager or
its affiliates in future periods.
| Columbia Variable Portfolio – Contrarian Core Fund | Semiannual Report 2020 | 19 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Note 4. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $479,639,914 and $573,161,018, respectively, for the six months ended June 30, 2020. The amount of purchase
and sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 5. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes referred to
as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 6. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund did not borrow or lend
money under the Interfund Program during the six months ended June 30, 2020.
Note 7. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by Citibank, N.A., HSBC Bank USA, N.A. and JPMorgan Chase Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. The credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment Manager or an affiliated investment manager, severally and
not jointly, permits collective borrowings up to $1 billion. Interest is charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the
one-month LIBOR rate and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a
commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The commitment fee is included in other expenses in the Statement of Operations. This agreement
expires annually in December unless extended or renewed.
The Fund had no borrowings during
the six months ended June 30, 2020.
Note 8. Significant
risks
Information technology sector
risk
The Fund may be more susceptible to
the particular risks that may affect companies in the information technology sector than if it were invested in a wider variety of companies in unrelated sectors. Companies in the information technology sectors are
subject to certain risks, including the risk that new services, equipment or technologies will not be accepted by consumers and businesses or will become rapidly obsolete. Performance of such companies may be affected
by factors including obtaining and protecting patents (or the failure to do so) and significant competitive pressures, including aggressive pricing of their products or services, new market entrants, competition for
market share and short product cycles due to an accelerated rate of technological developments. Such competitive pressures may lead to limited earnings and/or falling profit
| 20 | Columbia Variable Portfolio – Contrarian Core Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
margins. As a result, the value of their
securities may fall or fail to rise. In addition, many information technology sector companies have limited operating histories and prices of these companies’ securities historically have been more volatile than
other securities, especially over the short term.
Market and environment risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The Fund performance may also be
significantly negatively impacted by the economic impact of the coronavirus disease 2019 (COVID-19) pandemic. Public health crisis has become a pandemic that has resulted in, and may continue to result in, significant
global economic and societal disruption and market volatility due to disruptions in market access, resource availability, facilities operations, imposition of tariffs, export controls and supply chain disruption,
among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement and loss in human and other resources. The uncertainty surrounding the magnitude, duration,
reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as
the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and pandemics that may arise in the future – could negatively affect global economies and markets
in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in emerging market countries may be greater due to generally less established healthcare systems,
governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The disruptions caused
by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively impact the Fund’s ability to achieve their investment objectives. Any such event(s) could
have a significant adverse impact on the value and risk profile of the Fund.
The Investment Manager and its
affiliates have systematically implemented strategies to address the operating environment spurred by the COVID-19 pandemic. To promote the safety and security of our employees and to assure the continuity of our
business operations, we have implemented a work from home protocol for virtually all of our employee population, restricted business travel, and provided resources for complying with the guidance from the World Health
Organization, the U.S. Centers for Disease Control and governments. Our operations teams seek to operate without significant disruptions in service. Our pandemic strategy takes into consideration that a pandemic could
be widespread and may occur in multiple waves, affecting different communities at different times with varying levels of severity. We cannot, however, predict the impact that natural or man-made disasters, including
the COVID-19 pandemic, may have on the ability of our employees and third-party service providers to continue ordinary business operations and technology functions over near- or longer-term periods.
Shareholder concentration risk
At June 30, 2020, affiliated
shareholders of record owned 99.7% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
| Columbia Variable Portfolio – Contrarian Core Fund | Semiannual Report 2020 | 21 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Note 9. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 10. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial.
| 22 | Columbia Variable Portfolio – Contrarian Core Fund | Semiannual Report 2020 |
Liquidity Risk
Management Program
Pursuant to Rule 22e-4 under the
1940 Act, the Fund has adopted a liquidity risk management program (Program). The Program’s principal objectives include assessing, managing and periodically reviewing the Fund’s liquidity risk. Liquidity
risk is defined as the risk that the Fund could not meet redemption requests without significant dilution of remaining investors’ interests in the Fund.
The Board has appointed the
Investment Manager as the program administrator for the Fund’s Program. The Investment Manager has delegated oversight of the Program to its Liquidity Risk Management Committee (the Committee). At a board
meeting during the fiscal period, the Committee provided the Board with a report addressing the operations of the program and assessing its adequacy and effectiveness of implementation for the period December 1, 2018,
through December 31, 2019, including:
| • | the Fund had sufficient liquidity to both meet redemptions and operate effectively on behalf of shareholders; |
| • | there were no material changes to the Program during the period; |
| • | the implementation of the Program was effective to manage the Fund’s liquidity risk; and |
| • | the Program operated adequately during the period. |
There can be no assurance that the
Program will achieve its objectives in the future. Please refer to the Fund’s prospectus for more information regarding the Fund’s exposure to liquidity risk and other principal risks to which an
investment in the Fund may be subject.
Board Consideration
and Approval of Management
Agreement
On June 17, 2020, the Board of
Trustees (the Board) and the Trustees who are not interested persons (as defined in the Investment Company Act of 1940) (the Independent Trustees) of Columbia Funds Variable Insurance Trust (the Trust) unanimously
approved the continuation of the Management Agreement (the Management Agreement) with Columbia Management Investment Advisers, LLC (the Investment Manager) with respect to Columbia Variable Portfolio –
Contrarian Core Fund (the Fund), a series of the Trust. As detailed below, the Board’s Advisory Fees and Expenses Committee (the Committee) and the Board met on multiple occasions to review and discuss, among
themselves, with the management team of the Investment Manager and with an independent fee consultant, materials provided by the Investment Manager, the independent fee consultant and others before determining to
approve the continuation of the Management Agreement.
In connection with their
deliberations regarding the continuation of the Management Agreement, the Committee and the Board evaluated materials requested from the Investment Manager regarding the Fund and the Management Agreement, and
discussed these materials with representatives of the Investment Manager at Committee meetings held on March 10, 2020, April 30, 2020 and June 17, 2020 and at Board meetings held on March 11, 2020 and June 17, 2020.
In addition, the Board and its various committees consider matters bearing on the Management Agreement at other meetings throughout the year and in prior years and meet regularly with senior management of the Trust
and the Investment Manager. Through the Board’s Investment Oversight Committees, Trustees also meet with selected portfolio managers of the funds the Trustees oversee and with other investment personnel at
various times throughout the year. The Committee and the Board also consulted with the independent fee consultant, Fund counsel and the Independent Trustees’ independent legal counsel, who advised on various
matters with respect to the Committee’s and the Board’s considerations and otherwise assisted the Committee and the Board in their deliberations. On June 17, 2020, the Committee recommended that the Board
approve the continuation of the Management Agreement. On June 17, 2020, the Board, including the Independent Trustees, voting separately, unanimously approved the continuation of the Management Agreement for the
Fund.
| Columbia Variable Portfolio – Contrarian Core Fund | Semiannual Report 2020 | 23 |
Board Consideration and Approval of
Management
Agreement (continued)
The Committee and the Board considered all
information that they, their legal counsel or the Investment Manager believed reasonably necessary to evaluate and to determine whether to recommend for approval or approve the continuation of the Management
Agreement. The information and factors considered by the Committee and the Board in recommending for approval or approving the continuation of the Management Agreement for the Fund included the following:
| • | Information on the investment performance of the Fund relative to the performance of a group of mutual funds determined to be comparable to the Fund by an independent third-party data provider, as well as performance relative to benchmarks; |
| • | Information on the Fund’s management fees and total expenses, including information comparing the Fund’s expenses to those of a group of comparable mutual funds, as determined by the independent third-party data provider; |
| • | The Investment Manager’s agreement to contractually limit or cap total operating expenses for the Fund through April 30, 2021 so that total operating expenses (excluding certain fees and expenses, such as transaction costs and certain other investment related expenses, interest, taxes, acquired fund fees and expenses, and infrequent and/or unusual expenses) would not exceed a specified annual rate, as a percentage of the Fund’s net assets; |
| • | The terms and conditions of the Management Agreement; |
| • | The current and proposed terms and conditions of other agreements and arrangements with affiliates of the Investment Manager relating to the operations of the Fund, including agreements with respect to the provision of distribution, transfer agency and shareholder services to the Fund; |
| • | Descriptions of various functions performed by the Investment Manager under the Management Agreement, including portfolio management and portfolio trading practices; |
| • | Information regarding any recently negotiated management fees of similarly-managed portfolios of other institutional clients of the Investment Manager; |
| • | Information regarding the reputation, regulatory history and resources of the Investment Manager, including information regarding senior management, portfolio managers and other personnel; |
| • | Information regarding the capabilities of the Investment Manager with respect to compliance monitoring services, including an assessment of the Investment Manager’s compliance system by the Fund’s Chief Compliance Officer; and |
| • | The profitability to the Investment Manager and its affiliates from their relationships with the Fund. |
Nature, extent and quality of
services provided under the Management Agreement
The Committee and the Board
considered the nature, extent and quality of services provided to the Fund by the Investment Manager and its affiliates under the Management Agreement and under separate agreements for the provision of transfer agency
and shareholder services, and the resources dedicated to the Fund and the other Columbia Funds by the Investment Manager and its affiliates. The Committee and the Board considered, among other things, the Investment
Manager’s ability to attract, motivate and retain highly qualified research, advisory and supervisory investment professionals (including compensation programs for personnel involved in fund management,
reputation and other attributes), the portfolio management services provided by those investment professionals, and the quality of the Investment Manager’s investment research capabilities and trade execution
services. The Committee and the Board also considered the potential benefits to shareholders of investing in a mutual fund that is part of a fund complex offering exposure to a variety of asset classes and investment
disciplines and providing a variety of fund and shareholder services.
The Committee and the Board also
considered the professional experience and qualifications of the senior personnel of the Investment Manager, which included consideration of the Investment Manager’s experience with funds using an investment
strategy similar to that used by the Investment Manager for the Fund. The Committee and the Board noted the compliance programs of and the compliance-related resources provided to the Fund by the Investment Manager
and its affiliates and the resources dedicated by the Investment Manager and its affiliates to risk management, and considered the Investment Manager’s ability to provide administrative services to the Fund and
coordinate the activities of the Fund’s other service
| 24 | Columbia Variable Portfolio – Contrarian Core Fund | Semiannual Report 2020 |
Board Consideration and Approval of
Management
Agreement (continued)
providers. After reviewing these and related
factors, the Committee and the Board concluded, within the context of their overall conclusions, that the nature, extent and quality of the services provided to the Fund under the Management Agreement supported the
continuation of the Management Agreement.
Investment performance
The Committee and the Board
reviewed information about the performance of the Fund over various time periods, including performance information relative to benchmarks information that compared the performance of the Fund to the performance of a
group of comparable mutual funds as determined by the independent third-party data provider, and information and analysis provided by the independent fee consultant. The Committee and the Board also reviewed a
description of the third party’s methodology for identifying the Fund’s peer groups for purposes of performance and expense comparisons. Although the Fund’s performance lagged that of a relevant peer
group for certain (although not necessarily all) periods, the Committee and the Board concluded that other factors relevant to performance were sufficient, in light of other considerations, to support continuation of
the Management Agreement. Those factors included one or more of the following: (i) that the Fund’s performance, although lagging in certain recent periods, was stronger over the longer term; (ii) that the
underperformance was attributable, to a significant extent, to investment decisions that were reasonable and consistent with the Fund’s investment strategy and policies and that the Fund was performing within a
reasonable range of expectations, given those investment decisions, market conditions and the Fund’s investment strategy; (iii) that the Fund’s performance was competitive when compared to other relevant
performance benchmarks or peer groups; and (iv) that the Investment Manager had taken or was taking steps designed to help improve the Fund’s investment performance, including, but not limited to, replacing
portfolio managers, enhancing the resources supporting the portfolio managers, or modifying investment strategies.
The Committee and the Board noted
that, through December 31, 2019, the Fund’s performance was in the twelfth, sixty-eighth and fifty-sixth percentile (where the best performance would be in the first percentile) of its category selected by the
independent third-party data provider for the purposes of performance comparisons for the one-, three- and five-year periods, respectively.
The Committee and the Board also
considered the Investment Manager’s performance and reputation generally, the Investment Manager’s historical responsiveness to Board concerns about performance, and the Investment Manager’s
willingness to take steps intended to improve performance. After reviewing these and related factors, the Committee and the Board concluded, within the context of their overall conclusions, that the performance of the
Fund and the Investment Manager was sufficient, in light of other considerations, to support the continuation of the Management Agreement.
Investment management fee rates
and other expenses
The Committee and the Board
considered the management fees charged to the Fund under the Management Agreement as well as the total expenses incurred by the Fund. In assessing the reasonableness of the fees under the Management Agreement, the
Committee and the Board considered, among other information, the Fund’s total expense ratio as a percentage of average daily net assets. The Committee and the Board considered data provided by the independent
third-party data provider and the independent fee consultant. The Committee and the Board noted that, as of December 31, 2019, the Fund’s actual management fee and net total expense ratio were ranked in the
fourth and third quintiles, respectively, (where the lowest fees and expenses would be in the first quintile) against the Fund’s expense universe as determined by the independent third-party data provider for
purposes of expense comparison. The Committee and the Board also took into account the fee waiver and expense limitation arrangements agreed to by the Investment Manager, as noted above.
The Committee and the Board also
received and considered information about the management fees charged by the Investment Manager to institutional accounts. In considering the fees charged to those accounts, the Committee and the Board took into
account, among other things, the Investment Manager’s representations about the differences between managing mutual funds as compared to other types of accounts, including differences in the services provided,
differences in the risk profile of such business for the Investment Manager and the additional resources required to manage mutual funds effectively. The Committee and the Board also received and considered
information about the fees charged by the Investment Manager for sub-advisory services it provides to comparable unaffiliated funds. In evaluating the Fund’s management fees, the Committee and the Board also
took into account the demands, complexity and quality of the investment management of the Fund.
| Columbia Variable Portfolio – Contrarian Core Fund | Semiannual Report 2020 | 25 |
Board Consideration and Approval of
Management
Agreement (continued)
After reviewing these and related factors, the
Committee and the Board concluded, within the context of their overall conclusions, that the management fee rates and expenses of the Fund, in light of other considerations, supported the continuation of the
Management Agreement.
Costs of services provided and
profitability
The Committee and the Board also
took note of the costs the Investment Manager and its affiliates incur in connection with the services provided and the profitability to the Investment Manager and its affiliates from their relationships with the
Fund, and the efforts undertaken by the Investment Manager and its affiliates to manage efficiently their costs to provide such services.
The Committee and the Board also
considered the compensation directly or indirectly received by the Investment Manager’s affiliates in connection with their relationships with the Fund. The Committee and the Board reviewed information provided
by management as to the profitability to the Investment Manager and its affiliates of their relationships with the Fund, information about the allocation of expenses used to calculate profitability, and comparisons of
profitability levels realized in 2019 to profitability levels realized in 2018. When reviewing profitability, the Committee and the Board also considered court cases in which adviser profitability was an issue in
whole or in part, the performance of similarly managed funds, the performance of the Fund, and the expense ratio of the Fund. In addition, the Committee and the Board considered information provided by the Investment
Manager regarding the Investment Manager’s financial condition and comparing its profitability to that of other asset management firms that are, or are subsidiaries of, publicly traded companies. In this regard,
the Committee and the Board also considered data provided by the independent fee consultant.
After reviewing these and related
factors, the Committee and the Board concluded, within the context of their overall conclusions, that the costs of services provided and the profitability to the Investment Manager and its affiliates from their
relationships with the Fund supported the continuation of the Management Agreement.
Economies of scale
The Committee and the Board
considered the potential existence of economies of scale in the provision by the Investment Manager of services to the Fund, to groups of related funds, and to the Investment Manager’s investment advisory
clients as a whole, and whether those economies of scale were shared with the Fund through breakpoints in investment management fees or other means, such as expense limitation arrangements and additional investments
by the Investment Manager in investment, trading, compliance and other resources. The Committee and the Board noted that the management fee schedules for the Fund contained breakpoints that would reduce the fee rate
on assets above specified threshold levels.
In considering these matters, the
Committee and the Board also considered the costs of the services provided and the profitability to the Investment Manager and its affiliates from their relationships with the Fund, as noted above. After reviewing
these and related factors, the Committee and the Board concluded, within the context of their overall conclusions, that the extent to which any economies of scale were expected to be shared with the Fund supported the
continuation of the Management Agreement.
Other benefits to the Investment
Manager
The Committee and the Board
received and considered information regarding “fall-out” or ancillary benefits received by the Investment Manager and its affiliates as a result of their relationships with the Fund, such as the engagement
of the Investment Manager’s affiliates to provide distribution, transfer agency and shareholder services to the Fund. In this regard, among other matters, the Committee and the Board considered that the
Fund’s distributor retains a portion of the distribution fees from the Fund. The Committee and the Board also considered the benefits of research made available to the Investment Manager by reason of brokerage
commissions generated by the Fund’s securities transactions, and reviewed information about the Investment Manager’s practices with respect to considering brokerage and research services when allocating
portfolio transactions. In this connection, the Board also noted that the amount of research made available to the Investment Manager by reason of brokerage commissions had been declining over time, and may decline
further. The Committee and the Board also considered the tax benefits provided to affiliates of the Investment Manager as a result of the election by certain Funds to be taxed as partnerships. The Committee and the
Board recognized that the Investment Manager’s profitability would be somewhat lower without these benefits.
| 26 | Columbia Variable Portfolio – Contrarian Core Fund | Semiannual Report 2020 |
Board Consideration and Approval of
Management
Agreement (continued)
Conclusion
The Committee and the Board
reviewed all of the above considerations in reaching their decisions to recommend or approve the continuation of the Management Agreement. In their deliberations, the Trustees did not identify any particular
information that was all-important or controlling, and individual Trustees may have attributed different weights to the various factors. Based on their evaluation of all factors that they deemed to be material,
including those factors described above, and assisted by the advice of independent legal counsel, the Board, including the Independent Trustees, voting separately, unanimously approved the continuation of the
Management Agreement.
Results of Meeting of
Shareholders
At a Joint Special Meeting of
Shareholders held on April 16, 2020, shareholders of Columbia Funds Variable Insurance Trust elected each of the ten nominees for the trustees to the Board of Trustees of Columbia Funds Variable Insurance Trust, each
to hold office until he or she dies, resigns or is removed or, if sooner, until the next meeting of shareholders called for the purpose of electing trustees and until the election and qualification of his or her
successor, as follows:
| Trustee | Votes For | Votes Withheld | Abstentions |
| Janet L. Carrig | 26,231,108,809 | 1,129,334,152 | 0 |
| J. Kevin Connaughton | 26,249,644,638 | 1,110,798,323 | 0 |
| Olive Darragh | 26,323,990,658 | 1,036,452,304 | 0 |
| Douglas A. Hacker | 26,255,762,920 | 1,104,680,042 | 0 |
| Nancy T. Lukitsh | 26,332,381,722 | 1,028,061,240 | 0 |
| David M. Moffett | 26,252,719,395 | 1,107,723,567 | 0 |
| John J. Neuhauser | 26,222,694,456 | 1,137,748,505 | 0 |
| Christopher O. Petersen | 26,265,703,212 | 1,094,739,749 | 0 |
| Patrick J. Simpson | 26,222,908,024 | 1,137,534,938 | 0 |
| Natalie A. Trunow | 26,340,164,732 | 1,020,278,229 | 0 |
| Columbia Variable Portfolio – Contrarian Core Fund | Semiannual Report 2020 | 27 |
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 225 Franklin Street, Boston, MA
02110-2804
© 2020 Columbia Management Investment
Advisers, LLC.
C-1544 AP (8/20)
CTIVP® –
Lazard International Equity Advantage Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
| 3 | |
| 5 | |
| 6 | |
| 11 | |
| 12 | |
| 13 | |
| 14 | |
| 16 | |
| 24 | |
| 24 | |
| 29 |
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which CTIVP® – Lazard International Equity Advantage Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov.
Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge
by visiting columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT, and for reporting periods ended prior to March 31, 2019, on Form N-Q. The Fund’s Form N-Q and Form N-PORT
filings are available on the SEC’s website at sec.gov. The Fund’s complete schedule of portfolio holdings, as filed on Form N-Q or Form N-PORT, can also be obtained without charge, upon request, by calling
800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
225 Franklin Street
Boston, MA 02110
Fund distributor
Columbia Management Investment Distributors,
Inc.
225 Franklin Street
Boston, MA 02110
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
CTIVP® – Lazard International Equity
Advantage Fund | Semiannual Report 2020
Fund at a Glance
(Unaudited)
(Unaudited)
Investment objective
The Fund
seeks long-term capital appreciation.
Portfolio management
Lazard Asset Management LLC
Paul Moghtader, CFA
Taras Ivanenko, CFA, PhD
Ciprian Marin
Craig Scholl, CFA
Susanne Willumsen
Alex Lai, CFA
Jason Williams, CFA
| CTIVP® – Lazard International Equity Advantage Fund | Semiannual Report 2020 | 3 |
Fund at a Glance (continued)
(Unaudited)
(Unaudited)
| 4 | CTIVP® – Lazard International Equity Advantage Fund | Semiannual Report 2020 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount 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 $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
| January 1, 2020 — June 30, 2020 | |||||||
| Account value at the beginning of the period ($) | Account value at the end of the period ($) | Expenses paid during the period ($) | Fund’s annualized expense ratio (%) | ||||
| Actual | Hypothetical | Actual | Hypothetical | Actual | Hypothetical | Actual | |
| Class 1 | 1,000.00 | 1,000.00 | 876.10 | 1,020.84 | 3.78 | 4.07 | 0.81 |
| Class 2 | 1,000.00 | 1,000.00 | 875.20 | 1,019.59 | 4.94 | 5.32 | 1.06 |
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 366.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
| CTIVP® – Lazard International Equity Advantage Fund | Semiannual Report 2020 | 5 |
Portfolio of Investments
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 6 | CTIVP® – Lazard International Equity Advantage Fund | Semiannual Report 2020 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
The accompanying Notes to Financial
Statements are an integral part of this statement.
| CTIVP® – Lazard International Equity Advantage Fund | Semiannual Report 2020 | 7 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 8 | CTIVP® – Lazard International Equity Advantage Fund | Semiannual Report 2020 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Notes to Portfolio of
Investments
| (a) | Non-income producing investment. |
| (b) | Represents privately placed and other securities and instruments exempt from Securities and Exchange Commission registration (collectively, private placements), such as Section 4(a)(2) and Rule 144A eligible securities, which are often sold only to qualified institutional buyers. At June 30, 2020, the total value of these securities amounted to $4,940,311, which represents 0.33% of total net assets. |
| (c) | The rate shown is the seven-day current annualized yield at June 30, 2020. |
| (d) | As defined in the Investment Company Act of 1940, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the period ended June 30, 2020 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.253% | ||||||||
| 5,296,419 | 330,047,613 | (318,584,896) | (147) | 16,758,989 | (2,027) | 90,271 | 16,758,989 | |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Foreign equity securities actively
traded in markets where there is a significant delay in the local close relative to the New York Stock Exchange are classified as Level 2. The values of these securities may include an adjustment to reflect the impact
of market movements following the close of local trading, as described in Note 2 to the financial statements – Security valuation.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – Lazard International Equity Advantage Fund | Semiannual Report 2020 | 9 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Fair value measurements (continued)
The following table is a summary of the inputs used to value the Fund’s investments at June 30, 2020:
The following table is a summary of the inputs used to value the Fund’s investments at June 30, 2020:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Common Stocks | ||||
| Australia | — | 89,242,743 | — | 89,242,743 |
| Austria | — | 5,158,002 | — | 5,158,002 |
| Belgium | — | 7,232,185 | — | 7,232,185 |
| China | — | 4,218,347 | — | 4,218,347 |
| Denmark | — | 75,415,831 | — | 75,415,831 |
| Finland | — | 21,370,217 | — | 21,370,217 |
| France | — | 148,347,189 | — | 148,347,189 |
| Germany | — | 84,615,020 | — | 84,615,020 |
| Hong Kong | — | 48,322,375 | — | 48,322,375 |
| Ireland | — | 1,134,886 | — | 1,134,886 |
| Italy | — | 28,622,181 | — | 28,622,181 |
| Japan | — | 364,722,882 | — | 364,722,882 |
| Netherlands | — | 74,578,343 | — | 74,578,343 |
| New Zealand | — | 7,591,298 | — | 7,591,298 |
| Norway | — | 20,674,532 | — | 20,674,532 |
| Singapore | — | 9,635,104 | — | 9,635,104 |
| Spain | — | 21,023,715 | — | 21,023,715 |
| Sweden | — | 68,612,981 | — | 68,612,981 |
| Switzerland | — | 171,874,608 | — | 171,874,608 |
| United Kingdom | — | 181,190,988 | — | 181,190,988 |
| Total Common Stocks | — | 1,433,583,427 | — | 1,433,583,427 |
| Preferred Stocks | ||||
| Germany | — | 15,304,159 | — | 15,304,159 |
| Total Preferred Stocks | — | 15,304,159 | — | 15,304,159 |
| Money Market Funds | 16,758,989 | — | — | 16,758,989 |
| Total Investments in Securities | 16,758,989 | 1,448,887,586 | — | 1,465,646,575 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The Fund’s assets assigned to
the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical
assets. These assets include certain foreign securities for which a third party statistical pricing service may be employed for purposes of fair market valuation. The model utilized by such third party statistical
pricing service takes into account a security’s correlation to available market data including, but not limited to, intraday index, ADR, and exchange-traded fund movements.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 10 | CTIVP® – Lazard International Equity Advantage Fund | Semiannual Report 2020 |
Statement of Assets and Liabilities
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $1,317,428,293) | $1,448,887,586 |
| Affiliated issuers (cost $16,759,533) | 16,758,989 |
| Receivable for: | |
| Capital shares sold | 105,476 |
| Dividends | 2,287,990 |
| Foreign tax reclaims | 9,729,007 |
| Trustees’ deferred compensation plan | 111,489 |
| Other assets | 24,808 |
| Total assets | 1,477,905,345 |
| Liabilities | |
| Due to custodian | 15,335 |
| Foreign currency (cost $28,146) | 27,712 |
| Payable for: | |
| Capital shares purchased | 1,076,818 |
| Management services fees | 33,040 |
| Distribution and/or service fees | 150 |
| Service fees | 508 |
| Compensation of board members | 5,467 |
| Compensation of chief compliance officer | 275 |
| Custodian fees | 125,935 |
| Trustees’ deferred compensation plan | 111,489 |
| Total liabilities | 1,396,729 |
| Net assets applicable to outstanding capital stock | $1,476,508,616 |
| Represented by | |
| Paid in capital | 1,647,103,913 |
| Total distributable earnings (loss) | (170,595,297) |
| Total - representing net assets applicable to outstanding capital stock | $1,476,508,616 |
| Class 1 | |
| Net assets | $1,454,378,717 |
| Shares outstanding | 150,256,609 |
| Net asset value per share | $9.68 |
| Class 2 | |
| Net assets | $22,129,899 |
| Shares outstanding | 2,288,321 |
| Net asset value per share | $9.67 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – Lazard International Equity Advantage Fund | Semiannual Report 2020 | 11 |
Statement of Operations
Six Months Ended June 30, 2020 (Unaudited)
Six Months Ended June 30, 2020 (Unaudited)
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $51,211,889 |
| Dividends — affiliated issuers | 90,271 |
| Foreign taxes withheld | (5,302,177) |
| Total income | 45,999,983 |
| Expenses: | |
| Management services fees | 9,592,325 |
| Distribution and/or service fees | |
| Class 2 | 27,150 |
| Service fees | 6,083 |
| Compensation of board members | 24,307 |
| Custodian fees | 160,455 |
| Printing and postage fees | 5,357 |
| Audit fees | 59,515 |
| Legal fees | 33,538 |
| Compensation of chief compliance officer | 517 |
| Other | 34,939 |
| Total expenses | 9,944,186 |
| Net investment income | 36,055,797 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | (223,912,677) |
| Investments — affiliated issuers | (2,027) |
| Foreign currency translations | (754,599) |
| Net realized loss | (224,669,303) |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | (193,188,934) |
| Investments — affiliated issuers | (147) |
| Foreign currency translations | 125,820 |
| Net change in unrealized appreciation (depreciation) | (193,063,261) |
| Net realized and unrealized loss | (417,732,564) |
| Net decrease in net assets resulting from operations | $(381,676,767) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 12 | CTIVP® – Lazard International Equity Advantage Fund | Semiannual Report 2020 |
Statement of Changes in Net Assets
| Six Months Ended June 30, 2020 (Unaudited) | Year Ended December 31, 2019 | |
| Operations | ||
| Net investment income | $36,055,797 | $74,091,611 |
| Net realized loss | (224,669,303) | (108,099,124) |
| Net change in unrealized appreciation (depreciation) | (193,063,261) | 495,888,047 |
| Net increase (decrease) in net assets resulting from operations | (381,676,767) | 461,880,534 |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class 1 | (4,449,199) | (100,913,605) |
| Class 2 | (36,072) | (687,709) |
| Total distributions to shareholders | (4,485,271) | (101,601,314) |
| Decrease in net assets from capital stock activity | (1,166,974,746) | (135,770,094) |
| Total increase (decrease) in net assets | (1,553,136,784) | 224,509,126 |
| Net assets at beginning of period | 3,029,645,400 | 2,805,136,274 |
| Net assets at end of period | $1,476,508,616 | $3,029,645,400 |
| Six Months Ended | Year Ended | |||
| June 30, 2020 (Unaudited) | December 31, 2019 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 4,823,540 | 43,101,565 | 4,482,831 | 47,157,586 |
| Distributions reinvested | 516,748 | 4,449,199 | 9,539,041 | 100,913,605 |
| Redemptions | (126,633,899) | (1,215,155,494) | (26,852,935) | (286,602,283) |
| Net decrease | (121,293,611) | (1,167,604,730) | (12,831,063) | (138,531,092) |
| Class 2 | ||||
| Subscriptions | 251,300 | 2,410,803 | 433,206 | 4,548,563 |
| Distributions reinvested | 4,189 | 36,072 | 65,003 | 687,709 |
| Redemptions | (188,529) | (1,816,891) | (235,575) | (2,475,274) |
| Net increase | 66,960 | 629,984 | 262,634 | 2,760,998 |
| Total net decrease | (121,226,651) | (1,166,974,746) | (12,568,429) | (135,770,094) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – Lazard International Equity Advantage Fund | Semiannual Report 2020 | 13 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income | Net realized and unrealized gain (loss) | Total from investment operations | Distributions from net investment income | Distributions from net realized gains | Total distributions to shareholders | |
| Class 1 | |||||||
| Six Months Ended 6/30/2020 (Unaudited) | $11.07 | 0.14 | (1.51) | (1.37) | (0.02) | — | (0.02) |
| Year Ended 12/31/2019 | $9.80 | 0.26 | 1.37 | 1.63 | (0.31) | (0.05) | (0.36) |
| Year Ended 12/31/2018 | $11.97 | 0.26 | (2.14) | (1.88) | (0.25) | (0.04) | (0.29) |
| Year Ended 12/31/2017 | $9.78 | 0.21 | 2.13 | 2.34 | (0.15) | — | (0.15) |
| Year Ended 12/31/2016 | $9.60 | 0.20 | 0.18 | 0.38 | (0.20) | — | (0.20) |
| Year Ended 12/31/2015 | $10.24 | 0.24 | (0.58) | (0.34) | (0.30) | — | (0.30) |
| Class 2 | |||||||
| Six Months Ended 6/30/2020 (Unaudited) | $11.07 | 0.12 | (1.50) | (1.38) | (0.02) | — | (0.02) |
| Year Ended 12/31/2019 | $9.79 | 0.23 | 1.38 | 1.61 | (0.28) | (0.05) | (0.33) |
| Year Ended 12/31/2018 | $11.96 | 0.23 | (2.13) | (1.90) | (0.23) | (0.04) | (0.27) |
| Year Ended 12/31/2017 | $9.78 | 0.17 | 2.13 | 2.30 | (0.12) | — | (0.12) |
| Year Ended 12/31/2016 | $9.60 | 0.16 | 0.21 | 0.37 | (0.19) | — | (0.19) |
| Year Ended 12/31/2015 | $10.25 | 0.21 | (0.58) | (0.37) | (0.28) | — | (0.28) |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Annualized. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 14 | CTIVP® – Lazard International Equity Advantage Fund | Semiannual Report 2020 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Six Months Ended 6/30/2020 (Unaudited) | $9.68 | (12.39%) | 0.81%(c) | 0.81%(c) | 2.93%(c) | 48% | $1,454,379 |
| Year Ended 12/31/2019 | $11.07 | 16.82% | 0.79% | 0.79% | 2.46% | 62% | $3,005,054 |
| Year Ended 12/31/2018 | $9.80 | (15.98%) | 0.79% | 0.79% | 2.28% | 73% | $2,785,951 |
| Year Ended 12/31/2017 | $11.97 | 24.05% | 0.83% | 0.83% | 1.90% | 71% | $3,009,266 |
| Year Ended 12/31/2016 | $9.78 | 4.06% | 0.91% | 0.91% | 2.11% | 129% | $1,327,954 |
| Year Ended 12/31/2015 | $9.60 | (3.37%) | 0.92% | 0.92% | 2.35% | 12% | $1,240,134 |
| Class 2 | |||||||
| Six Months Ended 6/30/2020 (Unaudited) | $9.67 | (12.48%) | 1.06%(c) | 1.06%(c) | 2.54%(c) | 48% | $22,130 |
| Year Ended 12/31/2019 | $11.07 | 16.58% | 1.04% | 1.04% | 2.18% | 62% | $24,591 |
| Year Ended 12/31/2018 | $9.79 | (16.21%) | 1.04% | 1.04% | 2.04% | 73% | $19,185 |
| Year Ended 12/31/2017 | $11.96 | 23.64% | 1.08% | 1.08% | 1.55% | 71% | $17,987 |
| Year Ended 12/31/2016 | $9.78 | 3.87% | 1.17% | 1.17% | 1.68% | 129% | $5,764 |
| Year Ended 12/31/2015 | $9.60 | (3.71%) | 1.17% | 1.17% | 2.09% | 12% | $3,452 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – Lazard International Equity Advantage Fund | Semiannual Report 2020 | 15 |
Notes to Financial Statements
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Note 1. Organization
CTIVP® – Lazard
International Equity Advantage Fund (the Fund), a series of Columbia Funds Variable Insurance Trust (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the
1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1 and Class 2 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued by
affiliated and unaffiliated life insurance companies (Participating Insurance Companies) as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors (Qualified
Investors) authorized by Columbia Management Investment Distributors, Inc. (the Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by participating in a Qualified Plan or by
buying a Contract and making allocations to the Fund. Although all share classes generally have identical voting, dividend and liquidation rights, each share class votes separately when required by the Trust’s
organizational documents or by law. Different share classes pay different net investment income distribution amounts to the extent the expenses of such share classes differ, and distributions in liquidation will be
proportional to the net asset value of each share class. Each share class has its own cost structure and other features.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on any
exchange are valued at the mean between the closing bid and asked prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Foreign equity securities are
valued based on the closing price on the foreign exchange in which such securities are primarily traded. If any foreign equity security closing prices are not readily available, the securities are valued at the mean
of the latest quoted bid and ask prices on such exchanges or markets. Foreign currency exchange rates are determined at the scheduled closing time of the New York Stock Exchange. Many securities markets and exchanges
outside the U.S. close prior to the close of the New York Stock Exchange; therefore, the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but
before the close of the New York Stock Exchange. In those situations, foreign securities will be fair valued pursuant to a policy adopted by the Board of Trustees. Under the policy, the Fund may utilize a third-party
pricing service to determine these fair values. The third-party pricing service takes into account multiple factors, including, but not limited to, movements in the U.S. securities markets, certain depositary
receipts, futures contracts and foreign exchange rates that have occurred subsequent to the close of the foreign exchange or market, to determine a good faith estimate that reasonably reflects the current market
conditions as of the close of the New York Stock Exchange. The fair value of a security is likely to be different from the quoted or published price, if available.
Investments in open-end investment
companies (other than ETFs), are valued at the latest net asset value reported by those companies as of the valuation time.
| 16 | CTIVP® – Lazard International Equity Advantage Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Foreign currency transactions and
translations
The values of all assets and
liabilities denominated in foreign currencies are generally translated into U.S. dollars at exchange rates determined at the close of regular trading on the New York Stock Exchange. Net realized and unrealized gains
(losses) on foreign currency transactions and translations include gains (losses) arising from the fluctuation in exchange rates between trade and settlement dates on securities transactions, gains (losses) arising
from the disposition of foreign currency and currency gains (losses) between the accrual and payment dates on dividends, interest income and foreign withholding taxes.
For financial statement purposes,
the Fund does not distinguish that portion of gains (losses) on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations
are included with the net realized and unrealized gains (losses) on investments in the Statement of Operations.
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Corporate actions and dividend
income are generally recorded net of any non-reclaimable tax withholdings, on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities.
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
| CTIVP® – Lazard International Equity Advantage Fund | Semiannual Report 2020 | 17 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Federal income tax status
The Fund intends to qualify each
year as a regulated investment company under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its investment company taxable income and net capital gain, if any, for its
tax year, and as such will not be subject to federal income taxes. In addition, because the Fund meets the exception under Internal Revenue Code Section 4982(f), the Fund expects not to be subject to federal excise
tax. Therefore, no federal income or excise tax provision is recorded.
Foreign taxes
The Fund may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable, based upon its current interpretation of tax rules
and regulations that exist in the markets in which it invests.
Realized gains in certain countries
may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The
amount, if any, is disclosed as a liability on the Statement of Assets and Liabilities.
Distributions to subaccounts
Distributions to the subaccounts of
Contracts, Qualified Plans and Qualified Investors are recorded at the close of business on the record date and are payable on the first business day following the record date. Dividends from net investment income, if
any, are declared and distributed quarterly. Capital gain distributions, when available, will be made annually. However, an additional capital gain distribution may be made during the fiscal year in order to comply
with the Internal Revenue Code, as applicable to registered investment companies. Income distributions and capital gain distributions are determined in accordance with federal income tax regulations, which may differ
from GAAP. All dividends and distributions are reinvested in additional shares of the applicable share class of the Fund at the net asset value as of the ex-dividend date of the distribution.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The Investment Manager is responsible for the ultimate oversight of investments made by the
Fund. The Fund’s subadviser (see Subadvisory agreement below) has the primary responsibility for the day-to-day portfolio management of the Fund. The management services fee is an annual fee that is equal to a
percentage of the Fund’s daily net assets that declines from 0.87% to 0.67% as the Fund’s net assets increase. The annualized effective management services fee rate for the six months ended June 30, 2020
was 0.78% of the Fund’s average daily net assets.
Subadvisory agreement
The Investment Manager has entered
into a Subadvisory Agreement with Lazard Asset Management LLC (Lazard) to serve as the subadviser to the Fund. The Investment Manager compensates Lazard to manage the investment of the Fund’s assets.
| 18 | CTIVP® – Lazard International Equity Advantage Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. These members of the Board of Trustees
may participate in a Deferred Compensation Plan (the Deferred Plan) which may be terminated at any time. Obligations of the Deferred Plan will be paid solely out of the Fund’s assets, and all amounts payable
under the Deferred Plan constitute a general unsecured obligation of the Fund.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The annualized
effective service fee rate for the six months ended June 30, 2020, was 0.00% of the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. The Board of Trustees has approved, and the Fund has adopted, a distribution plan
(the Plan) which sets the distribution fees for the Fund. These fees are calculated daily and are intended to compensate the Distributor for selling shares of the Fund. The Fund pays a monthly distribution fee to the
Distributor at the maximum annual rate of 0.25% of the average daily net assets attributable to Class 2 shares of the Fund. The Fund pays no distribution and service fees for Class 1 shares.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft charges from the Fund’s
custodian, do not exceed the following annual rate(s) as a percentage of the class’ average daily net assets:
| Fee rate(s) contractual through April 30, 2021 | |
| Class 1 | 0.88% |
| Class 2 | 1.13 |
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and
brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short,
| CTIVP® – Lazard International Equity Advantage Fund | Semiannual Report 2020 | 19 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
inverse floater program fees and expenses,
transaction charges and interest on borrowed money, interest, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This agreement may be
modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements described above are
not recoverable by the Investment Manager or its affiliates in future periods.
Note 4. Federal tax
information
The timing and character of
income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP because of temporary or permanent book to tax differences.
At June 30, 2020, the approximate
cost of all investments for federal income tax purposes and the aggregate gross approximate unrealized appreciation and depreciation based on that cost was:
| Federal tax cost ($) | Gross unrealized appreciation ($) | Gross unrealized (depreciation) ($) | Net unrealized appreciation ($) |
| 1,334,188,000 | 220,875,000 | (89,416,000) | 131,459,000 |
Tax cost of investments and
unrealized appreciation/(depreciation) may also include timing differences that do not constitute adjustments to tax basis.
The following capital loss
carryforwards, determined at December 31, 2019, may be available to reduce future net realized gains on investments, if any, to the extent permitted by the Internal Revenue Code.
| No expiration short-term ($) | No expiration long-term ($) | Total ($) |
| (62,446,053) | (46,096,718) | (108,542,771) |
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Note 5. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $1,175,387,723 and $2,326,029,217, respectively, for the six months ended June 30, 2020. The amount of
purchase and sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 6. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes referred to
as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 7. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
| 20 | CTIVP® – Lazard International Equity Advantage Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund did not borrow or lend
money under the Interfund Program during the six months ended June 30, 2020.
Note 8. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by Citibank, N.A., HSBC Bank USA, N.A. and JPMorgan Chase Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. The credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment Manager or an affiliated investment manager, severally and
not jointly, permits collective borrowings up to $1 billion. Interest is charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the
one-month LIBOR rate and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a
commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The commitment fee is included in other expenses in the Statement of Operations. This agreement
expires annually in December unless extended or renewed.
The Fund had no borrowings during
the six months ended June 30, 2020.
Note 9. Significant
risks
Foreign securities and emerging
market countries risk
Investing in foreign securities may
involve certain risks not typically associated with investing in U.S. securities, such as increased currency volatility and risks associated with political, regulatory, economic, social, diplomatic and other
conditions or events occurring in the country or region, which may result in significant market volatility. In addition, certain foreign securities may not be as liquid as U.S. securities. Investing in emerging
markets may increase these risks and expose the Fund to elevated risks associated with increased inflation, deflation or currency devaluation. To the extent that the Fund concentrates its investment exposure to any
one or a few specific countries, the Fund will be particularly susceptible to the risks associated with the conditions, events or other factors impacting those countries or regions and may, therefore, have a greater
risk than that of a fund that is more geographically diversified.
Geographic focus risk
The Fund may be particularly
susceptible to economic, political, regulatory or other events or conditions affecting issuers and countries within the specific geographic regions in which the Fund invests. The Fund’s NAV may be more volatile
than the NAV of a more geographically diversified fund.
Asia Pacific Region. The Fund is particularly susceptible to economic, political, regulatory or other events or conditions affecting issuers and countries in the Asia Pacific region. Many of the countries in
the region are considered underdeveloped or developing, including from a political, economic and/or social perspective, and may have relatively unstable governments and economies based on limited business, industries
and/or natural resources or commodities. Events in any one country within the region may impact other countries in the region or the region as a whole. As a result, events in the region will generally have a greater
effect on the Fund than if the Fund were more geographically diversified. This could result in increased volatility in the value of the Fund’s investments and losses for the Fund. Also, securities of some
companies in the region can be less liquid than U.S. or other foreign securities, potentially making it difficult for the Fund to sell such securities at a desirable time and price.
Europe. The Fund is particularly susceptible to economic, political, regulatory or other events or conditions affecting issuers and countries in Europe. In addition, the private and public
sectors’ debt problems of a single European Union (EU) country can pose significant economic risks to the EU as a whole. As a result, the Fund’s NAV may be more volatile than the NAV of a more
geographically diversified fund. If securities of issuers in Europe fall out of favor, it may cause the Fund to underperform other funds that do not focus their investments in this region of the world. At a referendum
in June 2016, the UK voted to
| CTIVP® – Lazard International Equity Advantage Fund | Semiannual Report 2020 | 21 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
leave the EU (commonly known as
“Brexit”). After several extensions of the period for withdrawal negotiations, the UK and EU agreed on the terms of a withdrawal agreement, which was approved by the UK Parliament on January 22, 2020. The
UK formally exited the EU on January 31, 2020. Under the withdrawal agreement, a “transition period” runs through December 31, 2020 that is intended to allow for negotiation and implementation of new trade
and other cooperative agreements. The UK will remain in the EU’s single market and customs union during the transition period. There is a significant degree of uncertainty as to the outcome of these negotiations
and the future and full impact of Brexit remain uncertain and could have additional adverse effects on economies, financial markets, currencies and asset valuations around the world. During this period and beyond, the
impact of Brexit on the UK and European economies and the broader global economy could be significant, resulting in negative impacts on currency and financial markets generally, such as increased volatility and
illiquidity, and potentially lower economic growth in markets in Europe, which may adversely affect the value of your investment in the Fund.
Japan. The Fund is highly susceptible to the social, political, economic, regulatory and other conditions or events that may affect Japan’s economy. The Japanese economy is heavily dependent
upon international trade, including, among other things, the export of finished goods and the import of oil and other commodities and raw materials. Because of its trade dependence, the Japanese economy is
particularly exposed to the risks of currency fluctuation, foreign trade policy and regional and global economic disruption, including the risk of increased tariffs, embargoes, and other trade limitations or factors.
Strained relationships between Japan and its neighboring countries, including China, South Korea and North Korea, based on historical grievances, territorial disputes, and defense concerns, may also cause uncertainty
in Japanese markets. As a result, additional tariffs, other trade barriers, or boycotts may have an adverse impact on the Japanese economy. Japanese government policy has been characterized by economic regulation,
intervention, protectionism and large government deficits. The Japanese economy is also challenged by an unstable financial services sector, highly leveraged corporate balance sheets and extensive cross-ownership
among major corporations. Structural social and labor market changes, including an aging workforce, population decline and traditional aversion to labor mobility may adversely affect Japan’s economic
competitiveness and growth potential. The potential for natural disasters, such as earthquakes, volcanic eruptions, typhoons and tsunamis, could also have significant negative effects on Japan’s economy. As a
result of the Fund’s investment in Japanese securities, the Fund’s NAV may be more volatile than the NAV of a more geographically diversified fund. If securities of issuers in Japan fall out of favor, it
may cause the Fund to underperform other funds that do not focus their investments in Japan.
Market and environment risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The Fund performance may also be
significantly negatively impacted by the economic impact of the coronavirus disease 2019 (COVID-19) pandemic. Public health crisis has become a pandemic that has resulted in, and may continue to result in, significant
global economic and societal disruption and market volatility due to disruptions in market access, resource availability, facilities operations, imposition of tariffs, export controls and supply chain disruption,
among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement and loss in human and other resources. The uncertainty surrounding the magnitude, duration,
reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as
the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and pandemics that may arise in the future – could negatively affect global
| 22 | CTIVP® – Lazard International Equity Advantage Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
economies and markets in ways that cannot
necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in emerging market countries may be greater due to generally less established healthcare systems, governments and
financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The disruptions caused by COVID-19 could
prevent the Fund from executing advantageous investment decisions in a timely manner and negatively impact the Fund’s ability to achieve their investment objectives. Any such event(s) could have a significant
adverse impact on the value and risk profile of the Fund.
The Investment Manager and its
affiliates have systematically implemented strategies to address the operating environment spurred by the COVID-19 pandemic. To promote the safety and security of our employees and to assure the continuity of our
business operations, we have implemented a work from home protocol for virtually all of our employee population, restricted business travel, and provided resources for complying with the guidance from the World Health
Organization, the U.S. Centers for Disease Control and governments. Our operations teams seek to operate without significant disruptions in service. Our pandemic strategy takes into consideration that a pandemic could
be widespread and may occur in multiple waves, affecting different communities at different times with varying levels of severity. We cannot, however, predict the impact that natural or man-made disasters, including
the COVID-19 pandemic, may have on the ability of our employees and third-party service providers to continue ordinary business operations and technology functions over near- or longer-term periods.
Shareholder concentration risk
At June 30, 2020, affiliated
shareholders of record owned 100.0% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 10. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 11. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial.
| CTIVP® – Lazard International Equity Advantage Fund | Semiannual Report 2020 | 23 |
Liquidity Risk
Management Program
Pursuant to Rule 22e-4 under the
1940 Act, the Fund has adopted a liquidity risk management program (Program). The Program’s principal objectives include assessing, managing and periodically reviewing the Fund’s liquidity risk. Liquidity
risk is defined as the risk that the Fund could not meet redemption requests without significant dilution of remaining investors’ interests in the Fund.
The Board has appointed the
Investment Manager as the program administrator for the Fund’s Program. The Investment Manager has delegated oversight of the Program to its Liquidity Risk Management Committee (the Committee). At a board
meeting during the fiscal period, the Committee provided the Board with a report addressing the operations of the program and assessing its adequacy and effectiveness of implementation for the period December 1, 2018,
through December 31, 2019, including:
| • | the Fund had sufficient liquidity to both meet redemptions and operate effectively on behalf of shareholders; |
| • | there were no material changes to the Program during the period; |
| • | the implementation of the Program was effective to manage the Fund’s liquidity risk; and |
| • | the Program operated adequately during the period. |
There can be no assurance that the
Program will achieve its objectives in the future. Please refer to the Fund’s prospectus for more information regarding the Fund’s exposure to liquidity risk and other principal risks to which an
investment in the Fund may be subject.
Board Consideration
and Approval of Management
and Subadvisory Agreements
On June 17, 2020, the Board of
Trustees (the Board) and the Trustees who are not interested persons (as defined in the Investment Company Act of 1940) (the Independent Trustees) of Columbia Funds Variable Insurance Trust (the Trust) unanimously
approved the continuation of the Management Agreement (the Management Agreement) with Columbia Management Investment Advisers, LLC (the Investment Manager) and the Subadvisory Agreement (the Subadvisory Agreement)
between the Investment Manager and Lazard Asset Management LLC (the Subadviser) with respect to CTIVP® – Lazard International Equity Advantage Fund (the Fund), a series of the Trust. As detailed below, the
Board’s Advisory Fees and Expenses Committee (the Committee) and the Board met on multiple occasions to review and discuss, among themselves, with the management team of the Investment Manager and with an
independent fee consultant, materials provided by the Investment Manager, the independent fee consultant and others before determining to approve the continuation of the Management Agreement and the Subadvisory
Agreement (collectively, the Agreements).
In connection with their
deliberations regarding the continuation of the Management Agreement and the Subadvisory Agreement, the Committee and the Board evaluated materials requested from the Investment Manager regarding the Fund and the
Agreements, and discussed these materials with representatives of the Investment Manager at Committee meetings held on March 10, 2020, April 30, 2020 and June 17, 2020 and at Board meetings held on March 11, 2020 and
June 17, 2020. In addition, the Board and its various committees consider matters bearing on the Agreements at other meetings throughout the year and in prior years and meet regularly with senior management of the
Trust and the Investment Manager. Through the Board’s Investment Oversight Committees, Trustees also meet with selected portfolio managers of the funds the Trustees oversee and with other investment personnel at
various times throughout the year. The Committee and the Board also consulted with the independent fee consultant, Fund counsel and the Independent Trustees’ independent legal counsel, who advised on various
matters with respect to the Committee’s and the Board’s considerations and otherwise assisted the Committee and the Board in their deliberations. On June 17, 2020, the Committee recommended that the Board
approve the continuation of the Management Agreement and the Subadvisory Agreement. On June 17, 2020, the Board, including the Independent Trustees, voting separately, unanimously approved the continuation of the
Management Agreement and the Subadvisory Agreement for the Fund.
| 24 | CTIVP® – Lazard International Equity Advantage Fund | Semiannual Report 2020 |
Board Consideration and Approval of
Management
and Subadvisory Agreements (continued)
The Committee and the Board considered all
information that they, their legal counsel or the Investment Manager believed reasonably necessary to evaluate and to determine whether to recommend for approval or approve the continuation of the Management Agreement
and the Subadvisory Agreement. The information and factors considered by the Committee and the Board in recommending for approval or approving the continuation of the Management Agreement and the Subadvisory Agreement
for the Fund included the following:
| • | Information on the investment performance of the Fund relative to the performance of a group of mutual funds determined to be comparable to the Fund by the Investment Manager, as well as performance relative to benchmarks; |
| • | Information on the Fund’s management fees and total expenses, including information comparing the Fund’s expenses to those of a group of comparable mutual funds, as determined by the Investment Manager; |
| • | The Investment Manager’s agreement to contractually limit or cap total operating expenses for the Fund through April 30, 2021 so that total operating expenses (excluding certain fees and expenses, such as transaction costs and certain other investment related expenses, interest, taxes, acquired fund fees and expenses, and infrequent and/or unusual expenses) would not exceed a specified annual rate, as a percentage of the Fund’s net assets; |
| • | The terms and conditions of the Agreements; |
| • | The subadvisory fees payable by the Investment Manager under the Subadvisory Agreement; |
| • | The current and proposed terms and conditions of other agreements and arrangements with affiliates of the Investment Manager relating to the operations of the Fund, including agreements with respect to the provision of distribution, transfer agency and shareholder services to the Fund; |
| • | Descriptions of various functions performed by the Investment Manager and the Subadviser under the Agreements, including portfolio management and portfolio trading practices; |
| • | Information regarding any recently negotiated management fees of similarly-managed portfolios of other institutional clients of the Investment Manager; |
| • | Information regarding the reputation, regulatory history and resources of the Investment Manager and Subadviser, including information regarding senior management, portfolio managers and other personnel; |
| • | Information regarding the capabilities of the Investment Manager and the Subadviser with respect to compliance monitoring services, including an assessment of the Investment Manager’s and the Subadviser’s compliance system by the Fund’s Chief Compliance Officer; and |
| • | The profitability to the Investment Manager and its affiliates from their relationships with the Fund. |
Nature, extent and quality of
services provided under the Agreements
The Committee and the Board
considered the nature, extent and quality of services provided to the Fund by the Investment Manager, the Subadviser and the Investment Manager’s affiliates under the Agreements and under separate agreements for
the provision of transfer agency and shareholder services, and the resources dedicated to the Fund and the other Columbia Funds by the Investment Manager, the Subadviser and the Investment Manager’s affiliates.
The Committee and the Board considered, among other things, the Investment Manager’s ability to attract, motivate and retain highly qualified research, advisory and supervisory investment professionals
(including compensation programs for personnel involved in fund management, reputation and other attributes), the portfolio management services provided by those investment professionals, and the quality of the
Investment Manager’s and the Subadviser’s investment research capabilities and trade execution services. The Committee and the Board also considered the potential benefits to shareholders of investing in a
mutual fund that is part of a fund complex offering exposure to a variety of asset classes and investment disciplines and providing a variety of fund and shareholder services.
| CTIVP® – Lazard International Equity Advantage Fund | Semiannual Report 2020 | 25 |
Board Consideration and Approval of
Management
and Subadvisory Agreements (continued)
The Committee and the Board also considered the
professional experience and qualifications of the senior personnel of the Investment Manager and the Subadviser, which included consideration of the Investment Manager’s and the Subadviser’s experience
with funds using an investment strategy similar to that used by the Investment Manager and the Subadviser for the Fund. The Committee and the Board noted the compliance programs of and the compliance-related resources
provided to the Fund by the Investment Manager and its affiliates and the resources dedicated by the Investment Manager and its affiliates to risk management, and considered the Investment Manager’s ability to
provide administrative services to the Fund and coordinate the activities of the Fund’s other service providers. The Board also noted that, based on information provided by the Investment Manager, the Board had
approved the Subadviser’s code of ethics and compliance program, and that the Chief Compliance Officer of the Funds reports to the Trustees on the Subadviser’s compliance program.
The Committee and the Board
considered the diligence and selection process undertaken by the Investment Manager to select the Subadviser, including the Investment Manager’s rationale for recommending the continuation of the Subadvisory
Agreement, and the process for monitoring the Subadviser’s ongoing performance of services for the Fund. As part of these deliberations, the Committee and the Board considered the ability of the Investment
Manager, subject to the approval of the Board, to modify or enter into new subadvisory agreements without a shareholder vote pursuant to an exemptive order of the Securities and Exchange Commission. The Committee and
the Board also considered the scope of services provided to the Fund by the Investment Manager that are distinct from and in addition to those provided by the Subadviser, including cash flow management, treasury
services, risk oversight, investment oversight and Subadviser selection, oversight and transition management. After reviewing these and related factors, the Committee and the Board concluded, within the context of
their overall conclusions, that the nature, extent and quality of the services provided to the Fund under the Agreements supported the continuation of the Management Agreement and the Subadvisory Agreement.
Investment performance
The Committee and the Board
reviewed information about the performance of the Fund over various time periods, including performance information relative to benchmarks, information that compared the performance of the Fund to the performance of a
group of comparable mutual funds as determined by the Investment Manager, and information and analysis provided by the independent fee consultant. The Committee and the Board also reviewed a description of the
Investment Manager’s methodology for identifying the Fund’s peer groups for purposes of performance and expense comparisons. Although the Fund’s performance lagged that of a relevant peer group for
certain (although not necessarily all) periods, the Committee and the Board concluded that other factors relevant to performance were sufficient, in light of other considerations, to support continuation of the
Management Agreement and the Subadvisory Agreement. Those factors included one or more of the following: (i) that the Fund’s performance, although lagging in certain recent periods, was stronger over the longer
term; (ii) that the underperformance was attributable, to a significant extent, to investment decisions that were reasonable and consistent with the Fund’s investment strategy and policies and that the Fund was
performing within a reasonable range of expectations, given those investment decisions, market conditions and the Fund’s investment strategy; (iii) that the Fund’s performance was competitive when compared
to other relevant performance benchmarks or peer groups; and (iv) that the Investment Manager or Subadviser had taken or was taking steps designed to help improve the Fund’s investment performance, including,
but not limited to, replacing portfolio managers, enhancing the resources supporting the portfolio managers, or modifying investment strategies.
The Committee and the Board noted
that, through December 31, 2019, the Fund’s performance was in the ninetieth, eightieth and seventy-sixth percentile (where the best performance would be in the first percentile) of its category selected by the
Investment Manager for the purposes of performance comparisons for the one-, three- and five-year periods, respectively.
The Committee and the Board also
considered the Investment Manager’s and Subadviser’s performance and reputation generally, the Investment Manager’s historical responsiveness to Board concerns about performance, and the Investment
Manager’s willingness to take steps intended to improve performance. After reviewing these and related factors, the Committee and the Board concluded, within the context of their overall conclusions, that the
performance of the Fund, the Investment Manager and the Subadviser were sufficient, in light of other considerations, to support the continuation of the Management Agreement and the Subadvisory Agreement.
| 26 | CTIVP® – Lazard International Equity Advantage Fund | Semiannual Report 2020 |
Board Consideration and Approval of
Management
and Subadvisory Agreements (continued)
Investment management fee rates and other
expenses
The Committee and the Board
considered the management fees charged to the Fund under the Management Agreement and the Subadvisory Agreement, as well as the total expenses incurred by the Fund. In assessing the reasonableness of the fees under
the Management Agreement, the Committee and the Board considered, among other information, the Fund’s total expense ratio as a percentage of average daily net assets. The Committee and the Board considered data
provided by the Investment Manager and the independent fee consultant. The Committee and the Board noted that, as of December 31, 2019, the Fund’s actual management fee and net total expense ratio were ranked in
the fourth and first quintiles, respectively, (where the lowest fees and expenses would be in the first quintile) against the Fund’s expense universe as determined by the Investment Manager for purposes of
expense comparison. The Committee and the Board also considered the fees that the Subadviser charges to its other clients, and noted that the Investment Manager pays the fees of the Subadviser. The Committee and the
Board also took into account the fee waiver and expense limitation arrangements agreed to by the Investment Manager, as noted above.
The Committee and the Board also
received and considered information about the management fees charged by the Investment Manager to institutional accounts. In considering the fees charged to those accounts, the Committee and the Board took into
account, among other things, the Investment Manager’s representations about the differences between managing mutual funds as compared to other types of accounts, including differences in the services provided,
differences in the risk profile of such business for the Investment Manager and the additional resources required to manage mutual funds effectively. The Committee and the Board also received and considered
information about the fees charged by the Investment Manager for sub-advisory services it provides to comparable unaffiliated funds. In evaluating the Fund’s management fees, the Committee and the Board also
took into account the demands, complexity and quality of the investment management of the Fund.
After reviewing these and related
factors, the Committee and the Board concluded, within the context of their overall conclusions, that the management fee rates and expenses of the Fund, in light of other considerations, supported the continuation of
the Management Agreement and the Subadvisory Agreement.
Costs of services provided and
profitability
The Committee and the Board also
took note of the costs the Investment Manager and its affiliates incur in connection with the services provided and the profitability to the Investment Manager and its affiliates from their relationships with the
Fund, and the efforts undertaken by the Investment Manager and its affiliates to manage efficiently their costs to provide such services.
The Committee and the Board also
considered the compensation directly or indirectly received by the Investment Manager’s affiliates in connection with their relationships with the Fund. The Committee and the Board reviewed information provided
by management as to the profitability to the Investment Manager and its affiliates of their relationships with the Fund, including with respect to funds for which unaffiliated subadvisers provide services information
about the allocation of expenses used to calculate profitability, and comparisons of profitability levels realized in 2019 to profitability levels realized in 2018. When reviewing profitability, the Committee and the
Board also considered court cases in which adviser profitability was an issue in whole or in part, the performance of similarly managed funds, the performance of the Fund, and the expense ratio of the Fund. In
addition, the Committee and the Board considered information provided by the Investment Manager regarding the Investment Manager’s financial condition and comparing its profitability to that of other asset
management firms that are, or are subsidiaries of, publicly traded companies. In this regard, the Committee and the Board also considered data provided by the independent fee consultant. Because the Subadvisory
Agreement was negotiated at arms-length by the Investment Manager, which is responsible for payments to the Subadviser thereunder, the Committee and the Board did not consider the profitability to the Subadviser from
its relationship with the Fund.
After reviewing these and related
factors, the Committee and the Board concluded, within the context of their overall conclusions, that the costs of services provided and the profitability to the Investment Manager and its affiliates from their
relationships with the Fund supported the continuation of the Management Agreement and the Subadvisory Agreement.
| CTIVP® – Lazard International Equity Advantage Fund | Semiannual Report 2020 | 27 |
Board Consideration and Approval of
Management
and Subadvisory Agreements (continued)
Economies of scale
The Committee and the Board
considered the potential existence of economies of scale in the provision by the Investment Manager of services to the Fund, to groups of related funds, and to the Investment Manager’s investment advisory
clients as a whole, and whether those economies of scale were shared with the Fund through breakpoints in investment management fees or other means, such as expense limitation arrangements and additional investments
by the Investment Manager in investment, trading, compliance and other resources. The Committee and the Board noted that the management fee schedules for the Fund contained breakpoints that would reduce the fee rate
on assets above specified threshold levels.
The Committee and the Board noted
that the four breakpoints in the Subadvisory Agreement did not occur at the same levels as the breakpoints in the Management Agreement. The Committee and the Board noted that absent a shareholder vote, the Investment
Manager would bear any increase in fees payable under the Subadvisory Agreement. The Committee and the Board also noted the potential challenges of seeking to tailor the Management Agreement breakpoints to those of a
subadvisory agreement in this context, and the effect that capacity constraints on a subadviser’s ability to manage assets could potentially have on the ability of the Investment Manager to achieve economies of
scale, as new subadvisers may need to be added as the Fund grows, increasing the Investment Manager’s cost of compensating and overseeing the Fund’s subadvisers.
In considering these matters, the
Committee and the Board also considered the costs of the services provided and the profitability to the Investment Manager and its affiliates from their relationships with the Fund, as noted above. After reviewing
these and related factors, the Committee and the Board concluded, within the context of their overall conclusions, that the extent to which any economies of scale were expected to be shared with the Fund supported the
continuation of the Management Agreement and the Subadvisory Agreement.
Other benefits to the Investment
Manager and Subadviser
The Committee and the Board
received and considered information regarding “fall-out” or ancillary benefits received by the Investment Manager and its affiliates as a result of their relationships with the Fund, such as the engagement
of the Investment Manager’s affiliates to provide distribution, transfer agency and shareholder services to the Fund. In this regard, among other matters, the Committee and the Board considered that the
Fund’s distributor retains a portion of the distribution fees from the Fund. The Committee and the Board also considered the benefits of research made available to the Subadviser by reason of brokerage
commissions generated by the Fund’s securities transactions, and reviewed information about the Investment Manager’s practices with respect to considering brokerage and research services when allocating
portfolio transactions. In this connection, the Board also noted that the amount of research made available to the Investment Manager by reason of brokerage commissions had been declining over time, and may decline
further. The Committee and the Board recognized that the Investment Manager’s profitability would be somewhat lower without these benefits.
Conclusion
The Committee and the Board
reviewed all of the above considerations in reaching their decisions to recommend or approve the continuation of the Management Agreement and the Subadvisory Agreement. In their deliberations, the Trustees did not
identify any particular information that was all-important or controlling, and individual Trustees may have attributed different weights to the various factors. Based on their evaluation of all factors that they
deemed to be material, including those factors described above, and assisted by the advice of independent legal counsel, the Board, including the Independent Trustees, voting separately, unanimously approved the
continuation of the Management Agreement and the Subadvisory Agreement.
| 28 | CTIVP® – Lazard International Equity Advantage Fund | Semiannual Report 2020 |
Results of Meeting of
Shareholders
At a Joint Special Meeting of
Shareholders held on April 16, 2020, shareholders of Columbia Funds Variable Insurance Trust elected each of the ten nominees for the trustees to the Board of Trustees of Columbia Funds Variable Insurance Trust, each
to hold office until he or she dies, resigns or is removed or, if sooner, until the next meeting of shareholders called for the purpose of electing trustees and until the election and qualification of his or her
successor, as follows:
| Trustee | Votes For | Votes Withheld | Abstentions |
| Janet L. Carrig | 26,231,108,809 | 1,129,334,152 | 0 |
| J. Kevin Connaughton | 26,249,644,638 | 1,110,798,323 | 0 |
| Olive Darragh | 26,323,990,658 | 1,036,452,304 | 0 |
| Douglas A. Hacker | 26,255,762,920 | 1,104,680,042 | 0 |
| Nancy T. Lukitsh | 26,332,381,722 | 1,028,061,240 | 0 |
| David M. Moffett | 26,252,719,395 | 1,107,723,567 | 0 |
| John J. Neuhauser | 26,222,694,456 | 1,137,748,505 | 0 |
| Christopher O. Petersen | 26,265,703,212 | 1,094,739,749 | 0 |
| Patrick J. Simpson | 26,222,908,024 | 1,137,534,938 | 0 |
| Natalie A. Trunow | 26,340,164,732 | 1,020,278,229 | 0 |
| CTIVP® – Lazard International Equity Advantage Fund | Semiannual Report 2020 | 29 |
[THIS PAGE INTENTIONALLY LEFT
BLANK]
[THIS PAGE INTENTIONALLY LEFT BLANK]
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 225 Franklin Street, Boston, MA
02110-2804
© 2020 Columbia Management Investment
Advisers, LLC.
S-6597 AP (8/20)
Variable Portfolio
– Managed Volatility Conservative Growth Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
| 3 | |
| 5 | |
| 6 | |
| 12 | |
| 13 | |
| 14 | |
| 16 | |
| 18 | |
| 30 | |
| 30 | |
| 34 |
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which Variable Portfolio – Managed Volatility Conservative Growth Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of
Additional Information (SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at
sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available
without charge by visiting columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT, and for reporting periods ended prior to March 31, 2019, on Form N-Q. The Fund’s Form N-Q and Form N-PORT
filings are available on the SEC’s website at sec.gov. The Fund’s complete schedule of portfolio holdings, as filed on Form N-Q or Form N-PORT, can also be obtained without charge, upon request, by calling
800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
225 Franklin Street
Boston, MA 02110
Fund distributor
Columbia Management Investment Distributors,
Inc.
225 Franklin Street
Boston, MA 02110
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Variable Portfolio – Managed Volatility
Conservative Growth Fund | Semiannual Report 2020
Fund at a Glance
(Unaudited)
(Unaudited)
Investment objective
The Fund
pursues total return while seeking to manage the Fund’s exposure to equity market volatility.
Portfolio management
Brian Virginia
Lead Portfolio Manager
Managed Fund since 2014
Anwiti Bahuguna, Ph.D.
Portfolio Manager
Managed Fund since 2015
David Weiss, CFA
Portfolio Manager
Managed Fund since 2016
Joshua Kutin, CFA
Portfolio Manager
Managed Fund since 2018
| Variable Portfolio – Managed Volatility Conservative Growth Fund | Semiannual Report 2020 | 3 |
Fund at a Glance (continued)
(Unaudited)
(Unaudited)
| Portfolio Allocation (%) (at June 30, 2020) | |
| Allocations to Underlying Funds | |
| Equity Funds | 28.6 |
| International | 7.6 |
| U.S. Large Cap | 16.9 |
| U.S. Mid Cap | 1.9 |
| U.S. Small Cap | 2.2 |
| Exchange-Traded Equity Funds | 4.4 |
| International Mid Large Cap | 0.9 |
| U.S. Large Cap | 3.5 |
| Exchange-Traded Fixed Income Funds | 4.4 |
| Investment Grade | 4.4 |
| Fixed Income Funds | 36.2 |
| Investment Grade | 36.2 |
| Allocations to Tactical Assets | |
| Money Market Fund Shares Held to Cover Open Derivatives Instruments(a) | 14.3 |
| Options Purchased Puts | 1.0 |
| Residential Mortgage-Backed Securities - Agency | 11.1 |
| Total | 100.0 |
| (a) | Includes investments in Money Market Funds (amounting to $245.0 million) which have been segregated to cover obligations relating to the Fund’s investment in derivatives as part of its tactical allocation strategy. For a description of the Fund’s investments in derivatives, see Investments in derivatives following the Portfolio of Investments and Note 2 to the Notes to Financial Statements. |
Percentages indicated are based upon
total investments including options purchased and excluding all other investments in derivatives, if any. The Fund’s portfolio composition is subject to change.
| 4 | Variable Portfolio – Managed Volatility Conservative Growth Fund | Semiannual Report 2020 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount 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 results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
In addition to the ongoing expenses
which the Fund bears directly, the Fund’s shareholders indirectly bear the Fund’s allocable share of the costs and expenses of each underlying fund in which the Fund invests. You can also estimate the
effective expenses paid during the period, which includes the indirect fees associated with investing in the underlying funds, by using the amounts listed in the "Effective expenses paid during the period" column.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
| January 1, 2020 — June 30, 2020 | ||||||||||
| Account value at the beginning of the period ($) | Account value at the end of the period ($) | Expenses paid during the period ($) | Fund’s annualized expense ratio (%) | Effective expenses paid during the period ($) | Fund’s effective annualized expense ratio (%) | |||||
| Actual | Hypothetical | Actual | Hypothetical | Actual | Hypothetical | Actual | Actual | Hypothetical | Actual | |
| Class 1 | 1,000.00 | 1,000.00 | 1,008.90 | 1,023.42 | 1.45 | 1.46 | 0.29 | 3.65 | 3.67 | 0.73 |
| Class 2 | 1,000.00 | 1,000.00 | 1,008.20 | 1,022.18 | 2.70 | 2.72 | 0.54 | 4.89 | 4.93 | 0.98 |
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 366.
Effective expenses paid during the
period and the Fund’s effective annualized expense ratio include expenses borne directly to the class plus the Fund’s pro rata portion of the ongoing expenses charged by the underlying funds using the
expense ratio of each class of the underlying funds as of the underlying fund’s most recent shareholder report.
| Variable Portfolio – Managed Volatility Conservative Growth Fund | Semiannual Report 2020 | 5 |
Portfolio of Investments
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 6 | Variable Portfolio – Managed Volatility Conservative Growth Fund | Semiannual Report 2020 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
At June 30, 2020,
securities and/or cash totaling $20,113,631 were pledged as collateral.
Investments in
derivatives
| Long futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| British Pound | 18 | 09/2020 | USD | 1,394,663 | — | (37,991) |
| Japanese Yen | 24 | 09/2020 | USD | 2,781,300 | 7,441 | — |
| MSCI Singapore Index | 17 | 07/2020 | SGD | 502,945 | — | (5,800) |
| S&P 500 Index E-mini | 419 | 09/2020 | USD | 64,739,690 | 1,854,616 | — |
| U.S. Long Bond | 174 | 09/2020 | USD | 31,069,875 | 57,826 | — |
| U.S. Treasury 10-Year Note | 277 | 09/2020 | USD | 38,550,609 | 101,157 | — |
| U.S. Treasury 2-Year Note | 168 | 09/2020 | USD | 37,099,125 | 4,038 | — |
| U.S. Treasury 5-Year Note | 616 | 09/2020 | USD | 77,457,188 | 167,177 | — |
| U.S. Ultra Treasury Bond | 25 | 09/2020 | USD | 5,453,906 | — | (20,558) |
| Total | 2,192,255 | (64,349) | ||||
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Variable Portfolio – Managed Volatility Conservative Growth Fund | Semiannual Report 2020 | 7 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
| Short futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| Australian Dollar | (24) | 09/2020 | USD | (1,656,000) | 29,191 | — |
| Canadian Dollar | (7) | 09/2020 | USD | (515,340) | 8,458 | — |
| Euro FX | (6) | 09/2020 | USD | (844,013) | — | (1,570) |
| EURO STOXX 50 Index | (197) | 09/2020 | EUR | (6,349,310) | — | (241,790) |
| FTSE 100 Index | (53) | 09/2020 | GBP | (3,258,175) | — | (49,158) |
| Hang Seng Index | (33) | 07/2020 | HKD | (40,007,550) | 17,056 | — |
| New Zealand Dollar | (10) | 09/2020 | USD | (645,500) | 10,513 | — |
| OMXS30 Index | (426) | 07/2020 | SEK | (70,982,250) | — | (324,376) |
| Russell 2000 Index E-mini | (326) | 09/2020 | USD | (23,432,880) | — | (1,368,378) |
| S&P 500 Index E-mini | (570) | 09/2020 | USD | (88,070,700) | — | (1,981,631) |
| S&P/TSX 60 Index | (48) | 09/2020 | CAD | (8,913,600) | — | (199,959) |
| Swiss Franc | (13) | 09/2020 | USD | (1,719,250) | — | (15,892) |
| TOPIX Index | (13) | 09/2020 | JPY | (202,605,000) | — | (28,100) |
| Total | 65,218 | (4,210,854) | ||||
| Put option contracts purchased | ||||||||
| Description | Counterparty | Trading currency | Notional amount | Number of contracts | Exercise price/Rate | Expiration date | Cost ($) | Value ($) |
| S&P 500 Index | JPMorgan | USD | 155,014,500 | 500 | 2,500.00 | 12/17/2021 | 8,434,359 | 9,175,000 |
| S&P 500 Index | JPMorgan | USD | 95,488,932 | 308 | 2,600.00 | 12/17/2021 | 5,305,355 | 6,951,560 |
| S&P 500 Index | JPMorgan | USD | 35,653,335 | 115 | 2,400.00 | 12/17/2021 | 2,132,661 | 1,833,100 |
| Total | 15,872,375 | 17,959,660 | ||||||
Notes to Portfolio of
Investments
| (a) | As defined in the Investment Company Act of 1940, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the period ended June 30, 2020 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Capital gain distributions($) | Realized gain (loss)($) | Dividends — affiliated issuers ($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.253% | |||||||||
| 279,577,260 | 190,364,828 | (224,965,149) | 39,900 | 245,016,839 | — | 7,210 | 1,280,308 | 245,016,839 | |
| Columbia Variable Portfolio – Contrarian Core Fund, Class 1 Shares | |||||||||
| 26,081,069 | 689,850 | (625,798) | (466,011) | 25,679,110 | — | 211,851 | — | 973,800 | |
| Columbia Variable Portfolio – Disciplined Core Fund, Class 1 Shares | |||||||||
| 76,543,935 | 2,869,647 | (1,776,529) | (1,792,541) | 75,844,512 | — | 160,248 | — | 1,332,944 | |
| Columbia Variable Portfolio – Dividend Opportunity Fund, Class 1 Shares | |||||||||
| 17,903,007 | 1,357,507 | (36,220) | (2,291,870) | 16,932,424 | — | 2,735 | — | 658,337 | |
| Columbia Variable Portfolio – Intermediate Bond Fund, Class 1 Shares | |||||||||
| 117,907,590 | 1,092,632 | (3,832,875) | 7,554,109 | 122,721,456 | — | 84,061 | — | 10,802,945 | |
| Columbia Variable Portfolio – Large Cap Growth Fund, Class 1 Shares | |||||||||
| 23,914,473 | 238,845 | (1,444,171) | 1,531,984 | 24,241,131 | — | 954,934 | — | 1,002,528 | |
| Columbia Variable Portfolio – Limited Duration Credit Fund, Class 1 Shares | |||||||||
| 35,856,087 | 385,875 | (659,794) | 1,164,041 | 36,746,209 | — | (45,656) | — | 3,649,077 | |
| Columbia Variable Portfolio – Long Government/Credit Bond Fund, Class 1 Shares | |||||||||
| 62,599,357 | 199,887 | (4,720,102) | 7,811,089 | 65,890,231 | — | 725,434 | — | 5,262,798 | |
| Columbia Variable Portfolio – Mid Cap Growth Fund, Class 1 Shares | |||||||||
| 6,764,205 | 176,087 | (358,320) | 258,093 | 6,840,065 | — | 77,706 | — | 197,347 | |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 8 | Variable Portfolio – Managed Volatility Conservative Growth Fund | Semiannual Report 2020 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Notes
to Portfolio of Investments (continued)
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Capital gain distributions($) | Realized gain (loss)($) | Dividends — affiliated issuers ($) | End of period shares |
| Columbia Variable Portfolio – Overseas Core Fund, Class 1 Shares | |||||||||
| — | 29,420,413 | — | (373,804) | 29,046,609 | 362,672 | — | 148,054 | 2,474,158 | |
| Columbia Variable Portfolio - Select Large Cap Equity Fund, Class 1 Shares | |||||||||
| 12,421,820 | 287,548 | (371,817) | (10,627) | 12,326,924 | — | 46,016 | — | 1,038,494 | |
| Columbia Variable Portfolio – Select Large Cap Value Fund, Class 1 Shares | |||||||||
| 13,679,283 | 1,246,607 | (66,567) | (1,939,803) | 12,919,520 | — | 31,788 | — | 548,134 | |
| Columbia Variable Portfolio – Select Mid Cap Value Fund, Class 1 Shares | |||||||||
| 6,790,011 | 816,224 | (31,133) | (1,302,893) | 6,272,209 | — | 3,079 | — | 302,859 | |
| Columbia Variable Portfolio - Small Cap Value Fund, Class 1 Shares | |||||||||
| 6,418,653 | 1,038,689 | — | (1,211,969) | 6,245,373 | — | — | — | 502,848 | |
| Columbia Variable Portfolio - Small Company Growth Fund, Class 1 Shares | |||||||||
| 6,326,936 | 160,936 | (224,617) | 1,269,773 | 7,533,028 | — | 46,885 | — | 351,518 | |
| Columbia Variable Portfolio – U.S. Equities Fund, Class 1 Shares | |||||||||
| 1,622,596 | — | (1,010,188) | (612,408) | — | — | 108,545 | — | — | |
| Columbia Variable Portfolio – U.S. Government Mortgage Fund, Class 1 Shares | |||||||||
| 34,665,227 | 456,363 | (835,827) | 1,063,987 | 35,349,750 | — | 4,124 | — | 3,228,288 | |
| CTIVP® – American Century Diversified Bond Fund, Class 1 Shares | |||||||||
| 81,215,008 | 753,184 | (1,966,679) | 3,500,218 | 83,501,731 | — | (9,367) | — | 7,267,340 | |
| CTIVP® – Lazard International Equity Advantage Fund, Class 1 Shares | |||||||||
| 48,290,833 | 4,511,310 | (25,229,634) | (3,582,265) | 23,990,244 | — | (2,449,846) | 74,534 | 2,478,331 | |
| CTIVP® – Loomis Sayles Growth Fund, Class 1 Shares | |||||||||
| 21,528,957 | 163,713 | (1,312,546) | 1,364,328 | 21,744,452 | — | 740,547 | — | 527,138 | |
| CTIVP® – Los Angeles Capital Large Cap Growth Fund, Class 1 Shares | |||||||||
| 21,495,654 | 311,692 | (1,298,661) | 1,413,286 | 21,921,971 | — | 571,014 | — | 576,439 | |
| CTIVP® – MFS® Value Fund, Class 1 Shares | |||||||||
| 14,613,026 | 1,098,252 | (81,856) | (1,846,945) | 13,782,477 | — | 9,115 | — | 543,688 | |
| CTIVP® – Morgan Stanley Advantage Fund, Class 1 Shares | |||||||||
| 21,016,006 | 202,377 | (2,938,991) | 4,883,002 | 23,162,394 | — | 1,648,009 | — | 491,353 | |
| CTIVP® – T. Rowe Price Large Cap Value Fund, Class 1 Shares | |||||||||
| 13,483,531 | 1,503,383 | (40,199) | (2,411,221) | 12,535,494 | — | 4,728 | — | 586,868 | |
| CTIVP® – TCW Core Plus Bond Fund, Class 1 Shares | |||||||||
| 118,979,974 | 1,077,594 | (4,103,209) | 7,151,900 | 123,106,259 | — | 112,557 | — | 10,530,903 | |
| CTIVP® – Victory Sycamore Established Value Fund, Class 1 Shares | |||||||||
| 10,074,114 | 1,005,576 | (50,232) | (1,394,711) | 9,634,747 | — | (408) | — | 372,862 | |
| CTIVP® – Wells Fargo Short Duration Government Fund, Class 1 Shares | |||||||||
| 11,898,172 | 185,849 | (319,129) | 365,381 | 12,130,273 | — | 4,405 | — | 1,144,365 | |
| CTIVP® – Westfield Mid Cap Growth Fund, Class 1 Shares | |||||||||
| 10,285,151 | 369,644 | (433,205) | (148,644) | 10,072,946 | — | 189,261 | — | 314,780 | |
| Variable Portfolio - Partners Core Bond Fund, Class 1 Shares | |||||||||
| 137,270,041 | 1,276,982 | (4,549,011) | 8,047,422 | 142,045,434 | — | 113,203 | — | 12,017,380 | |
| Variable Portfolio - Partners Core Equity Fund, Class 1 Shares | |||||||||
| 29,261,237 | 1,191,276 | (485,388) | (1,203,873) | 28,763,252 | — | 49,284 | — | 1,263,208 | |
| Variable Portfolio - Partners International Core Equity Fund, Class 1 Shares | |||||||||
| 48,315,671 | 4,213,938 | (4,344,992) | (4,270,487) | 43,914,130 | 143,560 | (526,728) | 97,428 | 4,471,908 | |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – Managed Volatility Conservative Growth Fund | Semiannual Report 2020 | 9 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Notes
to Portfolio of Investments (continued)
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Capital gain distributions($) | Realized gain (loss)($) | Dividends — affiliated issuers ($) | End of period shares |
| Variable Portfolio - Partners International Growth Fund, Class 1 Shares | |||||||||
| 19,291,378 | 1,096,823 | (3,460,900) | (532,566) | 16,394,735 | 182,515 | (16,362) | 40,318 | 1,485,030 | |
| Variable Portfolio - Partners International Value Fund, Class 1 Shares | |||||||||
| 18,932,660 | 3,278,211 | (1,577,847) | (3,818,905) | 16,814,119 | — | (342,955) | 120,634 | 2,235,920 | |
| Variable Portfolio – Partners Small Cap Growth Fund, Class 1 Shares | |||||||||
| 12,381,369 | 659,533 | (550,832) | 40,281 | 12,530,351 | — | 28,470 | — | 497,631 | |
| Variable Portfolio – Partners Small Cap Value Fund, Class 1 Shares | |||||||||
| 13,425,677 | 2,077,022 | (10,585) | (2,941,806) | 12,550,308 | — | 176 | — | 560,031 | |
| Total | 1,380,829,968 | 15,305,445 | 1,358,200,707 | 688,747 | 2,544,063 | 1,761,276 | |||
| (b) | Non-income producing investment. |
| (c) | Represents a security purchased on a when-issued basis. |
| (d) | The rate shown is the seven-day current annualized yield at June 30, 2020. |
Abbreviation Legend
| TBA | To Be Announced |
Currency Legend
| CAD | Canada Dollar |
| EUR | Euro |
| GBP | British Pound |
| HKD | Hong Kong Dollar |
| JPY | Japanese Yen |
| SEK | Swedish Krona |
| SGD | Singapore Dollar |
| USD | US Dollar |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Certain investments that have been
measured at fair value using the net asset value (NAV) per share (or its equivalent) are not categorized in the fair value hierarchy. The fair value amounts presented in the table are intended to reconcile the fair
value hierarchy to the amounts presented in the Portfolio of Investments. The Variable Portfolios serve as investment vehicles for variable annuity contracts and variable life insurance policies. Principle investment
strategies within these Variable Portfolios vary based on the Portfolios investment objective. Investments in the Variable Portfolios may be redeemed on a daily basis without restriction.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 10 | Variable Portfolio – Managed Volatility Conservative Growth Fund | Semiannual Report 2020 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Fair value measurements (continued)
Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and estimated cash flows, and comparable company data.
Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at June 30, 2020:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Assets at NAV ($) | Total ($) | |
| Investments in Securities | |||||
| Equity Funds | — | — | — | 491,692,526 | 491,692,526 |
| Exchange-Traded Equity Funds | 75,470,744 | — | — | — | 75,470,744 |
| Exchange-Traded Fixed Income Funds | 76,398,050 | — | — | — | 76,398,050 |
| Fixed Income Funds | — | — | — | 621,491,342 | 621,491,342 |
| Residential Mortgage-Backed Securities - Agency | — | 190,052,219 | — | — | 190,052,219 |
| Options Purchased Puts | 17,959,660 | — | — | — | 17,959,660 |
| Money Market Funds | 245,016,839 | — | — | — | 245,016,839 |
| Total Investments in Securities | 414,845,293 | 190,052,219 | — | 1,113,183,868 | 1,718,081,380 |
| Investments in Derivatives | |||||
| Asset | |||||
| Futures Contracts | 2,257,473 | — | — | — | 2,257,473 |
| Liability | |||||
| Futures Contracts | (4,275,203) | — | — | — | (4,275,203) |
| Total | 412,827,563 | 190,052,219 | — | 1,113,183,868 | 1,716,063,650 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The Fund’s assets assigned to
the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical
assets.
Futures contracts are valued at
unrealized appreciation (depreciation).
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – Managed Volatility Conservative Growth Fund | Semiannual Report 2020 | 11 |
Statement of Assets and Liabilities
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $314,559,786) | $341,921,013 |
| Affiliated issuers (cost $1,169,265,324) | 1,358,200,707 |
| Options purchased (cost $15,872,375) | 17,959,660 |
| Cash collateral held at broker for: | |
| TBA | 77,000 |
| Margin deposits on: | |
| Futures contracts | 20,036,631 |
| Receivable for: | |
| Investments sold | 1,180,296 |
| Dividends | 318,815 |
| Interest | 208,799 |
| Variation margin for futures contracts | 979,553 |
| Trustees’ deferred compensation plan | 75,695 |
| Total assets | 1,740,958,169 |
| Liabilities | |
| Payable for: | |
| Investments purchased on a delayed delivery basis | 190,152,634 |
| Capital shares purchased | 1,686,138 |
| Variation margin for futures contracts | 1,735,212 |
| Management services fees | 9,163 |
| Distribution and/or service fees | 10,530 |
| Service fees | 75,799 |
| Compensation of board members | 3,812 |
| Compensation of chief compliance officer | 133 |
| Other expenses | 38,505 |
| Trustees’ deferred compensation plan | 75,695 |
| Total liabilities | 193,787,621 |
| Net assets applicable to outstanding capital stock | $1,547,170,548 |
| Represented by | |
| Trust capital | $1,547,170,548 |
| Total - representing net assets applicable to outstanding capital stock | $1,547,170,548 |
| Class 1 | |
| Net assets | $297,016 |
| Shares outstanding | 21,853 |
| Net asset value per share | $13.59 |
| Class 2 | |
| Net assets | $1,546,873,532 |
| Shares outstanding | 114,182,306 |
| Net asset value per share | $13.55 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 12 | Variable Portfolio – Managed Volatility Conservative Growth Fund | Semiannual Report 2020 |
Statement of Operations
Six Months Ended June 30, 2020 (Unaudited)
Six Months Ended June 30, 2020 (Unaudited)
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $1,501,121 |
| Dividends — affiliated issuers | 1,761,276 |
| Interest | 22,653 |
| Total income | 3,285,050 |
| Expenses: | |
| Management services fees | 1,611,176 |
| Distribution and/or service fees | |
| Class 2 | 1,861,903 |
| Service fees | 447,138 |
| Compensation of board members | 16,275 |
| Custodian fees | 15,460 |
| Printing and postage fees | 17,382 |
| Audit fees | 19,642 |
| Legal fees | 18,407 |
| Compensation of chief compliance officer | 265 |
| Other | 17,299 |
| Total expenses | 4,024,947 |
| Net investment loss | (739,897) |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 2,205,949 |
| Investments — affiliated issuers | 2,544,063 |
| Capital gain distributions from underlying affiliated funds | 688,747 |
| Foreign currency translations | 117,724 |
| Futures contracts | (27,214,586) |
| Options purchased | 21,928,975 |
| Net realized gain | 270,872 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | (2,351,623) |
| Investments — affiliated issuers | 15,305,445 |
| Foreign currency translations | 29,546 |
| Futures contracts | (5,241,701) |
| Options purchased | 4,650,370 |
| Net change in unrealized appreciation (depreciation) | 12,392,037 |
| Net realized and unrealized gain | 12,662,909 |
| Net increase in net assets resulting from operations | $11,923,012 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Variable Portfolio – Managed Volatility Conservative Growth Fund | Semiannual Report 2020 | 13 |
Statement of Changes in Net Assets
| Six Months Ended June 30, 2020 (Unaudited) | Year Ended December 31, 2019 | |
| Operations | ||
| Net investment income (loss) | $(739,897) | $22,377,977 |
| Net realized gain | 270,872 | 18,677,232 |
| Net change in unrealized appreciation (depreciation) | 12,392,037 | 141,835,609 |
| Net increase in net assets resulting from operations | 11,923,012 | 182,890,818 |
| Increase in net assets from capital stock activity | 14,315,711 | 37,059,723 |
| Total increase in net assets | 26,238,723 | 219,950,541 |
| Net assets at beginning of period | 1,520,931,825 | 1,300,981,284 |
| Net assets at end of period | $1,547,170,548 | $1,520,931,825 |
| Six Months Ended | Year Ended | |||
| June 30, 2020 (Unaudited) | December 31, 2019 (a) | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 11,103 | 141,983 | 15,903 | 209,249 |
| Redemptions | (4,630) | (59,011) | (523) | (6,781) |
| Net increase | 6,473 | 82,972 | 15,380 | 202,468 |
| Class 2 | ||||
| Subscriptions | 4,600,791 | 60,444,522 | 7,647,751 | 98,451,288 |
| Redemptions | (3,533,399) | (46,211,783) | (4,845,056) | (61,594,033) |
| Net increase | 1,067,392 | 14,232,739 | 2,802,695 | 36,857,255 |
| Total net increase | 1,073,865 | 14,315,711 | 2,818,075 | 37,059,723 |
| (a) | Class 1 shares are based on operations from February 20, 2019 (commencement of operations) through the stated period end. |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 14 | Variable Portfolio – Managed Volatility Conservative Growth Fund | Semiannual Report 2020 |
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| Variable Portfolio – Managed Volatility Conservative Growth Fund | Semiannual Report 2020 | 15 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income (loss) | Net realized and unrealized gain (loss) | Total from investment operations | |
| Class 1 | ||||
| Six Months Ended 6/30/2020 (Unaudited) | $13.47 | 0.01 | 0.11 | 0.12 |
| Year Ended 12/31/2019(d) | $12.36 | 0.16 | 0.95 | 1.11 |
| Class 2 | ||||
| Six Months Ended 6/30/2020 (Unaudited) | $13.44 | (0.01) | 0.12 | 0.11 |
| Year Ended 12/31/2019 | $11.79 | 0.20 | 1.45 | 1.65 |
| Year Ended 12/31/2018 | $12.32 | 0.15 | (0.68) | (0.53) |
| Year Ended 12/31/2017 | $11.08 | 0.11 | 1.13 | 1.24 |
| Year Ended 12/31/2016 | $10.74 | 0.07 | 0.27 | 0.34 |
| Year Ended 12/31/2015 | $10.94 | 0.09 | (0.29) | (0.20) |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Annualized. |
| (d) | Class 1 shares commenced operations on February 20, 2019. Per share data and total return reflect activity from that date. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 16 | Variable Portfolio – Managed Volatility Conservative Growth Fund | Semiannual Report 2020 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income (loss) ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Six Months Ended 6/30/2020 (Unaudited) | $13.59 | 0.89% | 0.29%(c) | 0.29%(c) | 0.15%(c) | 71% | $297 |
| Year Ended 12/31/2019(d) | $13.47 | 8.98% | 0.29%(c) | 0.29%(c) | 1.46%(c) | 137% | $207 |
| Class 2 | |||||||
| Six Months Ended 6/30/2020 (Unaudited) | $13.55 | 0.82% | 0.54%(c) | 0.54%(c) | (0.10%)(c) | 71% | $1,546,874 |
| Year Ended 12/31/2019 | $13.44 | 14.00% | 0.54% | 0.54% | 1.58% | 137% | $1,520,725 |
| Year Ended 12/31/2018 | $11.79 | (4.30%) | 0.54% | 0.54% | 1.21% | 101% | $1,300,981 |
| Year Ended 12/31/2017 | $12.32 | 11.19% | 0.53% | 0.53% | 0.95% | 100% | $1,425,498 |
| Year Ended 12/31/2016 | $11.08 | 3.17% | 0.51% | 0.51% | 0.64% | 108% | $1,358,964 |
| Year Ended 12/31/2015 | $10.74 | (1.83%) | 0.52% | 0.52% | 0.83% | 118% | $936,541 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – Managed Volatility Conservative Growth Fund | Semiannual Report 2020 | 17 |
Notes to Financial Statements
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Note 1. Organization
Variable Portfolio –
Managed Volatility Conservative Growth Fund (the Fund), a series of Columbia Funds Variable Insurance Trust (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as
amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
The Fund is a
“fund-of-funds”, investing significantly in affiliated funds managed by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc.
(Ameriprise Financial), its affiliates, or third-party advised (unaffiliated) funds, including exchange-traded funds (collectively, Underlying Funds). The Fund is exposed to the same risks as the Underlying Funds in
direct proportion to the allocation of its assets among the Underlying Funds. For information on the investment strategies and risks of the Underlying Funds, please refer to the Fund’s current prospectus and the
prospectuses of the Underlying Funds, which are available, free of charge, from the Securities and Exchange Commission website at www.sec.gov.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1 and Class 2 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued by
affiliated life insurance companies (Participating Insurance Companies) and other qualified institutional investors (Qualified Investors) authorized by Columbia Management Investment Distributors, Inc. (the
Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by buying a Contract.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on any
exchange are valued at the mean between the closing bid and asked prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Asset- and mortgage-backed
securities are generally valued by pricing services, which utilize pricing models that incorporate the securities’ cash flow and loan performance data. These models also take into account available market data,
including trades, market quotations, and benchmark yield curves for identical or similar securities. Factors used to identify similar securities may include, but are not limited to, issuer, collateral type, vintage,
prepayment speeds, collateral performance, credit ratings, credit enhancement and expected life. Asset-backed securities for which quotations are readily available may also be valued based upon an over-the-counter or
exchange bid quote from an approved independent broker-dealer.
Investments in the Underlying Funds
(other than ETFs) are valued at the latest net asset value reported by those companies as of the valuation time.
Futures and options on futures
contracts are valued based upon the settlement price at the close of regular trading on their principal exchanges or, in the absence of transactions, at the mean of the latest quoted bid and ask prices.
| 18 | Variable Portfolio – Managed Volatility Conservative Growth Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Option contracts are valued at the
mean of the latest quoted bid and ask prices on their primary exchanges. Option contracts, including over-the-counter option contracts, with no readily available market quotations are valued using mid-market
evaluations from independent third-party vendors.
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Foreign currency transactions and
translations
The values of all assets and
liabilities denominated in foreign currencies are generally translated into U.S. dollars at exchange rates determined at the close of regular trading on the New York Stock Exchange. Net realized and unrealized gains
(losses) on foreign currency transactions and translations include gains (losses) arising from the fluctuation in exchange rates between trade and settlement dates on securities transactions, gains (losses) arising
from the disposition of foreign currency and currency gains (losses) between the accrual and payment dates on dividends, interest income and foreign withholding taxes.
For financial statement purposes,
the Fund does not distinguish that portion of gains (losses) on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations
are included with the net realized and unrealized gains (losses) on investments in the Statement of Operations.
Derivative instruments
The Fund invests in certain
derivative instruments, as detailed below, to meet its investment objectives. Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more securities,
currencies, commodities, indices, or other assets or instruments. Derivatives may be used to increase investment flexibility (including to maintain cash reserves while maintaining desired exposure to certain assets),
for risk management (hedging) purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain investment risks,
such as foreign currency exchange rate risk, interest rate risk and credit risk. Derivatives may involve various risks, including the potential inability of the counterparty to fulfill its obligations under the terms
of the contract, the potential for an illiquid secondary market (making it difficult for the Fund to sell or terminate, including at favorable prices) and the potential for market movements which may expose the Fund
to gains or losses in excess of the amount shown in the Statement of Assets and Liabilities. The notional amounts of derivative instruments, if applicable, are not recorded in the financial statements.
A derivative instrument may suffer
a marked-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform its
obligations under the contract. The Fund’s risk of loss from counterparty credit risk on over-the-counter derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by
the Fund and the amount of any variation margin held by the counterparty, plus any replacement costs or related amounts. With exchange-traded or centrally cleared derivatives, there is reduced counterparty credit risk
to the Fund since the clearinghouse or central counterparty (CCP) provides some protection in the case of clearing member default. The clearinghouse or CCP stands between the buyer and the seller of the contract;
therefore, additional counterparty credit risk is failure of the clearinghouse or CCP. However, credit risk still exists in exchange-traded or centrally cleared derivatives with respect to initial and variation margin
that is held in a broker’s customer account. While brokers are required to segregate customer margin from their own assets, in the event
| Variable Portfolio – Managed Volatility Conservative Growth Fund | Semiannual Report 2020 | 19 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
that a broker becomes insolvent or goes into
bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the broker for all its clients, U.S. bankruptcy laws will typically allocate that shortfall on a pro-rata basis across all the
broker’s customers (including the Fund), potentially resulting in losses to the Fund.
In order to better define its
contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement)
or similar agreement with its derivatives contract counterparties. An ISDA Master Agreement is an agreement between the Fund and a counterparty that governs over-the-counter derivatives and typically contains, among
other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset with the counterparty
certain derivative instrument’s payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment
in the event of default (close-out netting), including the bankruptcy or insolvency of the counterparty. Note, however, that bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or
prohibitions against the right of offset or netting in bankruptcy, insolvency or other events.
Collateral (margin) requirements
differ by type of derivative. Margin requirements are established by the clearinghouse or CCP for exchange-traded and centrally cleared derivatives. Brokers can ask for margin in excess of the minimum in certain
circumstances. Collateral terms are contract specific for over-the-counter derivatives. For over-the-counter derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by
netting the marked-to-market amount for each transaction under such agreement and comparing that amount to the value of any variation margin currently pledged by the Fund and/or the counterparty. Generally, the amount
of collateral due from or to a party has to exceed a minimum transfer amount threshold (e.g., $250,000) before a transfer has to be made. To the extent amounts due to the Fund from its counterparties are not fully
collateralized, contractually or otherwise, the Fund bears the risk of loss from counterparty nonperformance. The Fund may also pay interest expense on cash collateral received from the broker. Any interest expense
paid by the Fund is shown on the Statement of Operations. The Fund attempts to mitigate counterparty risk by only entering into agreements with counterparties that it believes have the financial resources to honor
their obligations and by monitoring the financial stability of those counterparties.
Certain ISDA Master Agreements
allow counterparties of over-the-counter derivatives transactions to terminate derivatives contracts prior to maturity in the event the Fund’s net asset value declines by a stated percentage over a specified
time period or if the Fund fails to meet certain terms of the ISDA Master Agreement, which would cause the Fund to accelerate payment of any net liability owed to the counterparty. The Fund also has termination rights
if the counterparty fails to meet certain terms of the ISDA Master Agreement. In determining whether to exercise such termination rights, the Fund would consider, in addition to counterparty credit risk, whether
termination would result in a net liability owed from the counterparty.
For financial reporting purposes,
the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statement of Assets and Liabilities.
Futures contracts
Futures contracts are
exchange-traded and represent commitments for the future purchase or sale of an asset at a specified price on a specified date. The Fund bought and sold futures contracts to produce incremental earnings, to manage the
duration and yield curve exposure of the Fund versus the benchmark, to manage exposure to movements in interest rates, to manage exposure to the securities market and to maintain appropriate equity market exposure
while keeping sufficient cash to accommodate daily redemptions. These instruments may be used for other purposes in future periods. Upon entering into futures contracts, the Fund bears risks that it may not achieve
the anticipated benefits of the futures contracts and may realize a loss. Additional risks include counterparty credit risk, the possibility of an illiquid market, and that a change in the value of the contract or
option may not correlate with changes in the value of the underlying asset.
Upon entering into a futures
contract, the Fund deposits cash or securities with the broker, known as a futures commission merchant (FCM), in an amount sufficient to meet the initial margin requirement. The initial margin deposit must be
maintained at an established level over the life of the contract. Cash deposited as initial margin is recorded in the Statement of Assets and Liabilities as margin deposits. Securities deposited as initial margin are
designated in the Portfolio of Investments. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are
| 20 | Variable Portfolio – Managed Volatility Conservative Growth Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
equal to the daily change in the contract value
and are recorded as variation margin receivable or payable and are offset in unrealized gains or losses. The Fund recognizes a realized gain or loss when the contract is closed or expires. Futures contracts involve,
to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities.
Options contracts
Options are contracts which entitle
the holder to purchase or sell securities or other identified assets at a specified price, or in the case of index option contracts, to receive or pay the difference between the index value and the strike price of the
index option contract. Option contracts can be either exchange-traded or over-the-counter. The Fund purchased option contracts to produce incremental earnings, to decrease the Fund’s exposure to equity market
risk and to increase return on investments and to facilitate buying and selling of securities for investments. These instruments may be used for other purposes in future periods. Completion of transactions for option
contracts traded in the over-the-counter market depends upon the performance of the other party. Cash collateral may be collected or posted by the Fund to secure certain over-the-counter option contract trades. Cash
collateral held or posted by the Fund for such option contract trades must be returned to the broker or the Fund upon closure, exercise or expiration of the contract.
Options contracts purchased are
recorded as investments. When the Fund writes an options contract, the premium received is recorded as an asset and an amount equivalent to the premium is recorded as a liability in the Statement of Assets and
Liabilities and is subsequently adjusted to reflect the current fair value of the option written. Changes in the fair value of the written option are recorded as unrealized appreciation or depreciation until the
contract is exercised or has expired. The Fund will realize a gain or loss when the option contract is closed or expires. When option contracts are exercised, the proceeds on sales for a written call or purchased put
option contract, or the purchase cost for a written put or purchased call option contract, is adjusted by the amount of premium received or paid.
For over-the-counter options
purchased, the Fund bears the risk of loss of the amount of the premiums paid plus the positive change in market values net of any collateral held by the Fund should the counterparty fail to perform under the
contracts. Option contracts written by the Fund do not typically give rise to significant counterparty credit risk, as options written generally obligate the Fund and not the counterparty to perform. The risk in
writing a call option contract is that the Fund gives up the opportunity for profit if the market price of the security increases above the strike price and the option contract is exercised. The risk in writing a put
option contract is that the Fund may incur a loss if the market price of the security decreases below the strike price and the option contract is exercised. Exercise of a written option could result in the Fund
purchasing or selling a security or foreign currency when it otherwise would not, or at a price different from the current market value. In purchasing and writing options, the Fund bears the risk of an unfavorable
change in the value of the underlying instrument or the risk that the Fund may not be able to enter into a closing transaction due to an illiquid market.
Effects of derivative transactions in
the financial statements
The following tables are intended
to provide additional information about the effect of derivatives on the financial statements of the Fund, including: the fair value of derivatives by risk category and the location of those fair values in the
Statement of Assets and Liabilities; and the impact of derivative transactions over the period in the Statement of Operations, including realized and unrealized gains (losses). The derivative instrument schedules
following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any.
| Variable Portfolio – Managed Volatility Conservative Growth Fund | Semiannual Report 2020 | 21 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
The following table is a summary of
the fair value of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) at June 30, 2020:
| Asset derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Equity risk | Component of trust capital — unrealized appreciation on futures contracts | 1,871,672* |
| Equity risk | Investments, at value — Options Purchased | 17,959,660 |
| Foreign exchange risk | Component of trust capital — unrealized appreciation on futures contracts | 55,603* |
| Interest rate risk | Component of trust capital — unrealized appreciation on futures contracts | 330,198* |
| Total | 20,217,133 |
| Liability derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Equity risk | Component of trust capital - unrealized depreciation on futures contracts | 4,199,192* |
| Foreign exchange risk | Component of trust capital - unrealized depreciation on futures contracts | 55,453* |
| Interest rate risk | Component of trust capital - unrealized depreciation on futures contracts | 20,558* |
| Total | 4,275,203 |
| * | Includes cumulative appreciation (depreciation) as reported in the tables following the Portfolio of Investments. Only the current day’s variation margin is reported in receivables or payables in the Statement of Assets and Liabilities. |
The following table indicates the
effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) in the Statement of Operations for the six months ended June 30, 2020:
| Amount of realized gain (loss) on derivatives recognized in income | |||
| Risk exposure category | Futures contracts ($) | Options contracts purchased ($) | Total ($) |
| Equity risk | (35,503,790) | 21,928,975 | (13,574,815) |
| Foreign exchange risk | (1,136,104) | — | (1,136,104) |
| Interest rate risk | 9,425,308 | — | 9,425,308 |
| Total | (27,214,586) | 21,928,975 | (5,285,611) |
| Change in unrealized appreciation (depreciation) on derivatives recognized in income | |||
| Risk exposure category | Futures contracts ($) | Options contracts purchased ($) | Total ($) |
| Equity risk | (6,357,451) | 4,650,370 | (1,707,081) |
| Foreign exchange risk | (219,314) | — | (219,314) |
| Interest rate risk | 1,335,064 | — | 1,335,064 |
| Total | (5,241,701) | 4,650,370 | (591,331) |
The following table is a summary
of the average outstanding volume by derivative instrument for the six months ended June 30, 2020:
| Derivative instrument | Average notional amounts ($)* |
| Futures contracts — long | 270,538,892 |
| Futures contracts — short | 90,186,561 |
| 22 | Variable Portfolio – Managed Volatility Conservative Growth Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
| Derivative instrument | Average value ($)* |
| Options contracts — purchased | 16,553,818 |
| * | Based on the ending quarterly outstanding amounts for the six months ended June 30, 2020. |
Asset- and mortgage-backed
securities
The Fund may invest in asset-backed
and mortgage-backed securities. The maturity dates shown represent the original maturity of the underlying obligation. Actual maturity may vary based upon prepayment activity on these obligations. All, or a portion,
of the obligation may be prepaid at any time because the underlying asset may be prepaid. As a result, decreasing market interest rates could result in an increased level of prepayment. An increased prepayment rate
will have the effect of shortening the maturity of the security. Unless otherwise noted, the coupon rates presented are fixed rates.
Delayed delivery securities
The Fund may trade securities on
other than normal settlement terms, including securities purchased or sold on a “when-issued” or "forward commitment" basis. This may increase risk to the Fund since the other party to the transaction may
fail to deliver, which could cause the Fund to subsequently invest at less advantageous prices. The Fund designates cash or liquid securities in an amount equal to the delayed delivery commitment.
To be announced securities
The Fund may trade securities on a
To Be Announced (TBA) basis. As with other delayed-delivery transactions, a seller agrees to issue a TBA security at a future date. However, the seller does not specify the particular securities to be delivered.
Instead, the Fund agrees to accept any security that meets specified terms.
In some cases, Master Securities
Forward Transaction Agreements (MSFTAs) may be used to govern transactions of certain forward-settling agency mortgage-backed securities, such as delayed-delivery and TBAs, between the Fund and counterparty. The MSFTA
maintains provisions for, among other things, initiation and confirmation, payment and transfer, events of default, termination, and maintenance of collateral relating to such transactions.
Mortgage dollar roll transactions
The Fund may enter into mortgage
“dollar rolls” in which the Fund sells securities for delivery in the current month and simultaneously contracts with the same counterparty to repurchase similar but not identical securities (same type,
coupon and maturity) on a specified future date. During the roll period, the Fund loses the right to receive principal and interest paid on the securities sold. However, the Fund will benefit because it receives
negotiated amounts in the form of reductions of the purchase price for the future purchase plus the interest earned on the cash proceeds of the securities sold until the settlement date of the forward purchase. The
Fund records the incremental difference between the forward purchase and sale of each forward roll as a realized gain or loss. Unless any realized gains exceed the income, capital appreciation, and gain or loss due to
mortgage prepayments that would have been realized on the securities sold as part of the mortgage dollar roll, the use of this technique will diminish the investment performance of the Fund compared to what the
performance would have been without the use of mortgage dollar rolls. All cash proceeds will be invested in instruments that are permissible investments for the Fund. The Fund identifies cash or liquid securities in
an amount equal to the forward purchase price.
For financial reporting and tax
purposes, the Fund treats “to be announced” mortgage dollar rolls as two separate transactions, one involving the purchase of a security and a separate transaction involving a sale. These transactions may
increase the Fund’s portfolio turnover rate. The Fund does not currently enter into mortgage dollar rolls that are accounted for as financing transactions.
Mortgage dollar rolls involve the
risk that the market value of the securities the Fund is obligated to repurchase may decline below the repurchase price, or that the counterparty may default on its obligations.
| Variable Portfolio – Managed Volatility Conservative Growth Fund | Semiannual Report 2020 | 23 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Offsetting of assets and
liabilities
The following table presents the
Fund’s gross and net amount of assets and liabilities available for offset under netting arrangements as well as any related collateral received or pledged by the Fund as of June 30, 2020:
| JPMorgan ($) | |
| Assets | |
| Options purchased puts | 17,959,660 |
| Total financial and derivative net assets | 17,959,660 |
| Total collateral received (pledged) (a) | - |
| Net amount (b) | 17,959,660 |
| (a) | In some instances, the actual collateral received and/or pledged may be more than the amount shown due to overcollateralization. |
| (b) | Represents the net amount due from/(to) counterparties in the event of default. |
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Interest income is recorded on an
accrual basis. Market premiums and discounts, including original issue discounts, are amortized and accreted, respectively, over the expected life of the security on all debt securities, unless otherwise noted. The
Fund classifies gains and losses realized on prepayments received on mortgage-backed securities as adjustments to interest income.
The Fund may place a debt security
on non-accrual status and reduce related interest income when it becomes probable that the interest will not be collected and the amount of uncollectible interest can be reasonably estimated. A defaulted debt security
is removed from non-accrual status when the issuer resumes interest payments or when collectibility of interest is reasonably assured.
Corporate actions and dividend
income are recorded on the ex-dividend date.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a
proportionate change in return of capital to shareholders.
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
Income and capital gain
distributions from the Underlying Funds, if any, are recorded on the ex-dividend date.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
| 24 | Variable Portfolio – Managed Volatility Conservative Growth Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund is treated as a
partnership for federal income tax purposes, and the Fund does not expect to make regular distributions. The Fund will not be subject to federal income tax, and therefore, there is no provision for federal income
taxes. The partners of the Fund are subject to tax on their distributive share of the Fund’s income and loss. The components of the Fund’s net assets are reported at the partner-level for federal income
tax purposes, and therefore, are not presented in the Statement of Assets and Liabilities.
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees and
underlying fund fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager). Under the Management Agreement, the Investment Manager provides the Fund with investment research and advice, as well as
administrative and accounting services. The management services fee is an annual fee that is a blend of (i) 0.02% on assets invested in affiliated underlying funds (including exchange-traded funds and closed-end
funds) that pay a management services fee (or investment advisory services fee, as applicable) to the Investment Manager and (ii) a fee that declines from 0.72% to 0.52%, depending on asset levels, on assets
invested in securities (other than affiliated underlying funds (including exchange-traded funds and closed-end funds) that pay a management services fee (or investment advisory services fee, as applicable) to the
Investment Manager) including other funds advised by the Investment Manager that do not pay a management services fee to the Investment Manager, third party funds, derivatives and individual securities. The annualized
effective management services fee rate for the six months ended June 30, 2020 was 0.22% of the Fund’s average daily net assets.
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 expense and fee
levels and the Fund may own different proportions of Underlying Funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. These expenses are not reflected in the expenses
shown in Statement of Operations and are not included in the ratios to average net assets shown in the Financial Highlights.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. These members of the Board of Trustees
may participate in a Deferred Compensation Plan (the Deferred Plan) which may be terminated at any time. Obligations of the Deferred Plan will be paid solely out of the Fund’s assets, and all amounts payable
under the Deferred Plan constitute a general unsecured obligation of the Fund.
| Variable Portfolio – Managed Volatility Conservative Growth Fund | Semiannual Report 2020 | 25 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The annualized
effective service fee rate for the six months ended June 30, 2020, was 0.06% of the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. The Board of Trustees has approved, and the Fund has adopted, a distribution plan
(the Plan) which sets the distribution fees for the Fund. These fees are calculated daily and are intended to compensate the Distributor for selling shares of the Fund. The Fund pays a monthly distribution fee to the
Distributor at the maximum annual rate of 0.25% of the average daily net assets attributable to Class 2 shares of the Fund. The Fund pays no distribution and service fees for Class 1 shares.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, including indirect expenses of the Underlying Funds, after giving effect to fees waived/expenses reimbursed and any balance credits
and/or overdraft charges from the Fund’s custodian, do not exceed the following annual rate(s) as a percentage of the class’ average daily net assets:
| May 1, 2020 through April 30, 2021 | Prior to May 1, 2020 | |
| Class 1 | 0.80% | 0.85% |
| Class 2 | 1.05 | 1.10 |
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), transaction costs and brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program
fees and expenses, transaction charges and interest on borrowed money, interest, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This
agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements
described above are not recoverable by the Investment Manager or its affiliates in future periods.
| 26 | Variable Portfolio – Managed Volatility Conservative Growth Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Note 4. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $1,135,013,020 and $958,551,137, respectively, for the six months ended June 30, 2020, of which $1,013,999,000
and $868,721,564, respectively, were U.S. government securities. The amount of purchase and sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 5. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes referred to
as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 6. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund did not borrow or lend
money under the Interfund Program during the six months ended June 30, 2020.
Note 7. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by Citibank, N.A., HSBC Bank USA, N.A. and JPMorgan Chase Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. The credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment Manager or an affiliated investment manager, severally and
not jointly, permits collective borrowings up to $1 billion. Interest is charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the
one-month LIBOR rate and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a
commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The commitment fee is included in other expenses in the Statement of Operations. This agreement
expires annually in December unless extended or renewed.
The Fund had no borrowings during
the six months ended June 30, 2020.
Note 8. Significant
risks
Derivatives risk
Losses involving derivative
instruments may be substantial, because a relatively small movement in the underlying reference (which is generally the price, rate or other economic indicator associated with a security(ies), commodity, currency or
index or other instrument or asset) may result in a substantial loss for the Fund. In addition to the potential for increased losses, the use of derivative instruments may lead to increased volatility within the Fund.
Derivatives will typically increase the Fund’s exposure to principal risks to which it is otherwise exposed, and may expose the Fund to additional risks, including correlation risk, counterparty risk, hedging
risk, leverage risk, liquidity risk and pricing risk.
| Variable Portfolio – Managed Volatility Conservative Growth Fund | Semiannual Report 2020 | 27 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Market and environment risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The Fund performance may also be
significantly negatively impacted by the economic impact of the coronavirus disease 2019 (COVID-19) pandemic. Public health crisis has become a pandemic that has resulted in, and may continue to result in, significant
global economic and societal disruption and market volatility due to disruptions in market access, resource availability, facilities operations, imposition of tariffs, export controls and supply chain disruption,
among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement and loss in human and other resources. The uncertainty surrounding the magnitude, duration,
reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as
the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and pandemics that may arise in the future – could negatively affect global economies and markets
in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in emerging market countries may be greater due to generally less established healthcare systems,
governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The disruptions caused
by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively impact the Fund’s ability to achieve their investment objectives. Any such event(s) could
have a significant adverse impact on the value and risk profile of the Fund.
The Investment Manager and its
affiliates have systematically implemented strategies to address the operating environment spurred by the COVID-19 pandemic. To promote the safety and security of our employees and to assure the continuity of our
business operations, we have implemented a work from home protocol for virtually all of our employee population, restricted business travel, and provided resources for complying with the guidance from the World Health
Organization, the U.S. Centers for Disease Control and governments. Our operations teams seek to operate without significant disruptions in service. Our pandemic strategy takes into consideration that a pandemic could
be widespread and may occur in multiple waves, affecting different communities at different times with varying levels of severity. We cannot, however, predict the impact that natural or man-made disasters, including
the COVID-19 pandemic, may have on the ability of our employees and third-party service providers to continue ordinary business operations and technology functions over near- or longer-term periods.
Shareholder concentration risk
At June 30, 2020, affiliated
shareholders of record owned 100.0% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 9. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
| 28 | Variable Portfolio – Managed Volatility Conservative Growth Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Note 10. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial.
| Variable Portfolio – Managed Volatility Conservative Growth Fund | Semiannual Report 2020 | 29 |
Liquidity Risk
Management Program
Pursuant to Rule 22e-4 under the
1940 Act, the Fund has adopted a liquidity risk management program (Program). The Program’s principal objectives include assessing, managing and periodically reviewing the Fund’s liquidity risk. Liquidity
risk is defined as the risk that the Fund could not meet redemption requests without significant dilution of remaining investors’ interests in the Fund.
The Board has appointed the
Investment Manager as the program administrator for the Fund’s Program. The Investment Manager has delegated oversight of the Program to its Liquidity Risk Management Committee (the Committee). At a board
meeting during the fiscal period, the Committee provided the Board with a report addressing the operations of the program and assessing its adequacy and effectiveness of implementation for the period December 1, 2018,
through December 31, 2019, including:
| • | the Fund had sufficient liquidity to both meet redemptions and operate effectively on behalf of shareholders; |
| • | there were no material changes to the Program during the period; |
| • | the implementation of the Program was effective to manage the Fund’s liquidity risk; and |
| • | the Program operated adequately during the period. |
There can be no assurance that the
Program will achieve its objectives in the future. Please refer to the Fund’s prospectus for more information regarding the Fund’s exposure to liquidity risk and other principal risks to which an
investment in the Fund may be subject.
Board Consideration
and Approval of Management
Agreement
On June 17, 2020, the Board of
Trustees (the Board) and the Trustees who are not interested persons (as defined in the Investment Company Act of 1940) (the Independent Trustees) of Columbia Funds Variable Insurance Trust (the Trust) unanimously
approved the continuation of the Management Agreement (the Management Agreement) with Columbia Management Investment Advisers, LLC (the Investment Manager) with respect to Variable Portfolio – Managed Volatility
Conservative Growth Fund (the Fund), a series of the Trust. As detailed below, the Board’s Advisory Fees and Expenses Committee (the Committee) and the Board met on multiple occasions to review and discuss,
among themselves, with the management team of the Investment Manager and with an independent fee consultant, materials provided by the Investment Manager, the independent fee consultant and others before determining
to approve the continuation of the Management Agreement.
In connection with their
deliberations regarding the continuation of the Management Agreement, the Committee and the Board evaluated materials requested from the Investment Manager regarding the Fund and the Management Agreement, and
discussed these materials with representatives of the Investment Manager at Committee meetings held on March 10, 2020, April 30, 2020 and June 17, 2020 and at Board meetings held on March 11, 2020 and June 17, 2020.
In addition, the Board and its various committees consider matters bearing on the Management Agreement at other meetings throughout the year and in prior years and meet regularly with senior management of the Trust
and the Investment Manager. Through the Board’s Investment Oversight Committees, Trustees also meet with selected portfolio managers of the funds the Trustees oversee and with other investment personnel at
various times throughout the year. The Committee and the Board also consulted with the independent fee consultant, Fund counsel and the Independent Trustees’ independent legal counsel, who advised on various
matters with respect to the Committee’s and the Board’s considerations and otherwise assisted the Committee and the Board in their deliberations. On June 17, 2020, the Committee recommended that the Board
approve the continuation of the Management Agreement. On June 17, 2020, the Board, including the Independent Trustees, voting separately, unanimously approved the continuation of the Management Agreement for the
Fund.
| 30 | Variable Portfolio – Managed Volatility Conservative Growth Fund | Semiannual Report 2020 |
Board Consideration and Approval of
Management
Agreement (continued)
The Committee and the Board considered all
information that they, their legal counsel or the Investment Manager believed reasonably necessary to evaluate and to determine whether to recommend for approval or approve the continuation of the Management
Agreement. The information and factors considered by the Committee and the Board in recommending for approval or approving the continuation of the Management Agreement for the Fund included the following:
| • | Information on the investment performance of the Fund relative to the performance of a group of mutual funds determined to be comparable to the Fund by the Investment Manager, as well as performance relative to benchmarks; |
| • | Information on the Fund’s management fees and total expenses, including information comparing the Fund’s expenses to those of a group of comparable mutual funds, as determined by the Investment Manager; |
| • | The Investment Manager’s agreement to contractually limit or cap total operating expenses for the Fund through April 30, 2021 so that total operating expenses (excluding certain fees and expenses, such as transaction costs and certain other investment related expenses, interest, taxes, and infrequent and/or unusual expenses) would not exceed a specified annual rate, as a percentage of the Fund’s net assets; |
| • | The terms and conditions of the Management Agreement; |
| • | The current and proposed terms and conditions of other agreements and arrangements with affiliates of the Investment Manager relating to the operations of the Fund, including agreements with respect to the provision of distribution, transfer agency and shareholder services to the Fund; |
| • | Descriptions of various functions performed by the Investment Manager under the Management Agreement, including portfolio management and portfolio trading practices; |
| • | Information regarding any recently negotiated management fees of similarly-managed portfolios of other institutional clients of the Investment Manager; |
| • | Information regarding the reputation, regulatory history and resources of the Investment Manager, including information regarding senior management, portfolio managers and other personnel; |
| • | Information regarding the capabilities of the Investment Manager with respect to compliance monitoring services, including an assessment of the Investment Manager’s compliance system by the Fund’s Chief Compliance Officer; and |
| • | The profitability to the Investment Manager and its affiliates from their relationships with the Fund. |
Nature, extent and quality of
services provided under the Management Agreement
The Committee and the Board
considered the nature, extent and quality of services provided to the Fund by the Investment Manager and its affiliates under the Management Agreement and under separate agreements for the provision of transfer agency
and shareholder services, and the resources dedicated to the Fund and the other Columbia Funds by the Investment Manager and its affiliates. The Committee and the Board considered, among other things, the Investment
Manager’s ability to attract, motivate and retain highly qualified research, advisory and supervisory investment professionals (including compensation programs for personnel involved in fund management,
reputation and other attributes), the portfolio management services provided by those investment professionals, and the quality of the Investment Manager’s investment research capabilities and trade execution
services. The Committee and the Board also considered the potential benefits to shareholders of investing in a mutual fund that is part of a fund complex offering exposure to a variety of asset classes and investment
disciplines and providing a variety of fund and shareholder services.
The Committee and the Board also
considered the professional experience and qualifications of the senior personnel of the Investment Manager, which included consideration of the Investment Manager’s experience with funds using an investment
strategy similar to that used by the Investment Manager for the Fund. The Committee and the Board noted the compliance programs of and the compliance-related resources provided to the Fund by the Investment Manager
and its affiliates and the resources dedicated by the Investment Manager and its affiliates to risk management, and considered the Investment Manager’s ability to provide administrative services to the Fund and
coordinate the activities of the Fund’s other service
| Variable Portfolio – Managed Volatility Conservative Growth Fund | Semiannual Report 2020 | 31 |
Board Consideration and Approval of
Management
Agreement (continued)
providers. After reviewing these and related
factors, the Committee and the Board concluded, within the context of their overall conclusions, that the nature, extent and quality of the services provided to the Fund under the Management Agreement supported the
continuation of the Management Agreement.
Investment performance
The Committee and the Board
reviewed information about the performance of the Fund over various time periods, including performance information relative to benchmarks, information that compared the performance of the Fund to the performance of a
group of comparable mutual funds as determined by the Investment Manager, and information and analysis provided by the independent fee consultant. The Committee and the Board also reviewed a description of the
Investment Manager’s methodology for identifying the Fund’s peer groups for purposes of performance and expense comparisons. Although the Fund’s performance lagged that of a relevant peer group for
certain (although not necessarily all) periods, the Committee and the Board concluded that other factors relevant to performance were sufficient, in light of other considerations, to support continuation of the
Management Agreement. Those factors included one or more of the following: (i) that the Fund’s performance, although lagging in certain recent periods, was stronger over the longer term; (ii) that the
underperformance was attributable, to a significant extent, to investment decisions that were reasonable and consistent with the Fund’s investment strategy and policies and that the Fund was performing within a
reasonable range of expectations, given those investment decisions, market conditions and the Fund’s investment strategy; (iii) that the Fund’s performance was competitive when compared to other relevant
performance benchmarks or peer groups; and (iv) that the Investment Manager had taken or was taking steps designed to help improve the Fund’s investment performance, including, but not limited to, replacing
portfolio managers, enhancing the resources supporting the portfolio managers, or modifying investment strategies.
The Committee and the Board noted
that, through December 31, 2019, the Fund’s performance was in the ninetieth, eighty-fourth and ninety-first percentile (where the best performance would be in the first percentile) of its category selected by
the Investment Manager for the purposes of performance comparisons for the one-, three- and five-year periods, respectively.
The Committee and the Board also
considered the Investment Manager’s performance and reputation generally, the Investment Manager’s historical responsiveness to Board concerns about performance, and the Investment Manager’s
willingness to take steps intended to improve performance. After reviewing these and related factors, the Committee and the Board concluded, within the context of their overall conclusions, that the performance of the
Fund and the Investment Manager was sufficient, in light of other considerations, to support the continuation of the Management Agreement.
Investment management fee rates
and other expenses
The Committee and the Board
considered the management fees charged to the Fund under the Management Agreement as well as the total expenses incurred by the Fund. In assessing the reasonableness of the fees under the Management Agreement, the
Committee and the Board considered, among other information, the Fund’s total expense ratio as a percentage of average daily net assets. The Committee and the Board considered data provided by the Investment
Manager and the independent fee consultant. The Committee and the Board noted that, as of December 31, 2019, the Fund’s actual management fee and net total expense ratio were both ranked in the second quintile
(where the lowest fees and expenses would be in the first quintile) against the Fund’s expense universe as determined by the Investment Manager for purposes of expense comparison. The Committee and the Board
also took into account the fee waiver and expense limitation arrangements agreed to by the Investment Manager, as noted above.
The Committee and the Board also
received and considered information about the management fees charged by the Investment Manager to institutional accounts. In considering the fees charged to those accounts, the Committee and the Board took into
account, among other things, the Investment Manager’s representations about the differences between managing mutual funds as compared to other types of accounts, including differences in the services provided,
differences in the risk profile of such business for the Investment Manager and the additional resources required to manage mutual funds effectively. The Committee and the Board also received and considered
information about the fees charged by the Investment Manager for sub-advisory services it provides to comparable unaffiliated funds. In evaluating the Fund’s management fees, the Committee and the Board also
took into account the demands, complexity and quality of the investment management of the Fund.
| 32 | Variable Portfolio – Managed Volatility Conservative Growth Fund | Semiannual Report 2020 |
Board Consideration and Approval of
Management
Agreement (continued)
After reviewing these and related factors, the
Committee and the Board concluded, within the context of their overall conclusions, that the management fee rates and expenses of the Fund, in light of other considerations, supported the continuation of the
Management Agreement.
Costs of services provided and
profitability
The Committee and the Board also
took note of the costs the Investment Manager and its affiliates incur in connection with the services provided and the profitability to the Investment Manager and its affiliates from their relationships with the
Fund, and the efforts undertaken by the Investment Manager and its affiliates to manage efficiently their costs to provide such services.
The Committee and the Board also
considered the compensation directly or indirectly received by the Investment Manager’s affiliates in connection with their relationships with the Fund. The Committee and the Board reviewed information provided
by management as to the profitability to the Investment Manager and its affiliates of their relationships with the Fund, information about the allocation of expenses used to calculate profitability, and comparisons of
profitability levels realized in 2019 to profitability levels realized in 2018. When reviewing profitability, the Committee and the Board also considered court cases in which adviser profitability was an issue in
whole or in part, the performance of similarly managed funds, the performance of the Fund, and the expense ratio of the Fund. In addition, the Committee and the Board considered information provided by the Investment
Manager regarding the Investment Manager’s financial condition and comparing its profitability to that of other asset management firms that are, or are subsidiaries of, publicly traded companies. In this regard,
the Committee and the Board also considered data provided by the independent fee consultant.
After reviewing these and related
factors, the Committee and the Board concluded, within the context of their overall conclusions, that the costs of services provided and the profitability to the Investment Manager and its affiliates from their
relationships with the Fund supported the continuation of the Management Agreement.
Economies of scale
The Committee and the Board
considered the potential existence of economies of scale in the provision by the Investment Manager of services to the Fund, to groups of related funds, and to the Investment Manager’s investment advisory
clients as a whole, and whether those economies of scale were shared with the Fund through breakpoints in investment management fees or other means, such as expense limitation arrangements and additional investments
by the Investment Manager in investment, trading, compliance and other resources. The Committee and the Board noted that the management fee schedules for the Fund contained breakpoints that would reduce the fee rate
on assets above specified threshold levels.
In considering these matters, the
Committee and the Board also considered the costs of the services provided and the profitability to the Investment Manager and its affiliates from their relationships with the Fund, as noted above. After reviewing
these and related factors, the Committee and the Board concluded, within the context of their overall conclusions, that the extent to which any economies of scale were expected to be shared with the Fund supported the
continuation of the Management Agreement.
Other benefits to the Investment
Manager
The Committee and the Board
received and considered information regarding “fall-out” or ancillary benefits received by the Investment Manager and its affiliates as a result of their relationships with the Fund, such as the engagement
of the Investment Manager’s affiliates to provide distribution, transfer agency and shareholder services to the Fund. In this regard, among other matters, the Committee and the Board considered that the
Fund’s distributor retains a portion of the distribution fees from the Fund. The Committee and the Board also considered the benefits of research made available to the Investment Manager by reason of brokerage
commissions generated by the Fund’s securities transactions, and reviewed information about the Investment Manager’s practices with respect to considering brokerage and research services when allocating
portfolio transactions. In this connection, the Board also noted that the amount of research made available to the Investment Manager by reason of brokerage commissions had been declining over time, and may decline
further. The Committee and the Board also considered the tax benefits provided to affiliates of the Investment Manager as a result of the election by certain Funds to be taxed as partnerships. The Committee and the
Board recognized that the Investment Manager’s profitability would be somewhat lower without these benefits.
| Variable Portfolio – Managed Volatility Conservative Growth Fund | Semiannual Report 2020 | 33 |
Board Consideration and Approval of
Management
Agreement (continued)
Conclusion
The Committee and the Board
reviewed all of the above considerations in reaching their decisions to recommend or approve the continuation of the Management Agreement. In their deliberations, the Trustees did not identify any particular
information that was all-important or controlling, and individual Trustees may have attributed different weights to the various factors. Based on their evaluation of all factors that they deemed to be material,
including those factors described above, and assisted by the advice of independent legal counsel, the Board, including the Independent Trustees, voting separately, unanimously approved the continuation of the
Management Agreement.
Results of Meeting of
Shareholders
At a Joint Special Meeting of
Shareholders held on April 16, 2020, shareholders of Columbia Funds Variable Insurance Trust elected each of the ten nominees for the trustees to the Board of Trustees of Columbia Funds Variable Insurance Trust, each
to hold office until he or she dies, resigns or is removed or, if sooner, until the next meeting of shareholders called for the purpose of electing trustees and until the election and qualification of his or her
successor, as follows:
| Trustee | Votes For | Votes Withheld | Abstentions |
| Janet L. Carrig | 26,231,108,809 | 1,129,334,152 | 0 |
| J. Kevin Connaughton | 26,249,644,638 | 1,110,798,323 | 0 |
| Olive Darragh | 26,323,990,658 | 1,036,452,304 | 0 |
| Douglas A. Hacker | 26,255,762,920 | 1,104,680,042 | 0 |
| Nancy T. Lukitsh | 26,332,381,722 | 1,028,061,240 | 0 |
| David M. Moffett | 26,252,719,395 | 1,107,723,567 | 0 |
| John J. Neuhauser | 26,222,694,456 | 1,137,748,505 | 0 |
| Christopher O. Petersen | 26,265,703,212 | 1,094,739,749 | 0 |
| Patrick J. Simpson | 26,222,908,024 | 1,137,534,938 | 0 |
| Natalie A. Trunow | 26,340,164,732 | 1,020,278,229 | 0 |
| 34 | Variable Portfolio – Managed Volatility Conservative Growth Fund | Semiannual Report 2020 |
[THIS PAGE INTENTIONALLY LEFT
BLANK]
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 225 Franklin Street, Boston, MA
02110-2804
© 2020 Columbia Management Investment
Advisers, LLC.
S-6619 AP (8/20)
Variable Portfolio
– Managed Volatility Growth Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
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| 5 | |
| 6 | |
| 13 | |
| 14 | |
| 15 | |
| 16 | |
| 18 | |
| 31 | |
| 31 | |
| 35 |
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which Variable Portfolio – Managed Volatility Growth Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov.
Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge
by visiting columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT, and for reporting periods ended prior to March 31, 2019, on Form N-Q. The Fund’s Form N-Q and Form N-PORT
filings are available on the SEC’s website at sec.gov. The Fund’s complete schedule of portfolio holdings, as filed on Form N-Q or Form N-PORT, can also be obtained without charge, upon request, by calling
800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
225 Franklin Street
Boston, MA 02110
Fund distributor
Columbia Management Investment Distributors,
Inc.
225 Franklin Street
Boston, MA 02110
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Variable Portfolio – Managed Volatility
Growth Fund | Semiannual Report 2020
Fund at a Glance
(Unaudited)
(Unaudited)
Investment objective
The Fund
pursues total return while seeking to manage the Fund’s exposure to equity market volatility.
Portfolio management
Brian Virginia
Lead Portfolio Manager
Managed Fund since 2014
Anwiti Bahuguna, Ph.D.
Portfolio Manager
Managed Fund since 2015
David Weiss, CFA
Portfolio Manager
Managed Fund since 2016
Joshua Kutin, CFA
Portfolio Manager
Managed Fund since 2018
| Variable Portfolio – Managed Volatility Growth Fund | Semiannual Report 2020 | 3 |
Fund at a Glance (continued)
(Unaudited)
(Unaudited)
| Portfolio Allocation (%) (at June 30, 2020) | |
| Allocations to Underlying Funds | |
| Equity Funds | 52.7 |
| International | 14.2 |
| U.S. Large Cap | 31.9 |
| U.S. Mid Cap | 3.4 |
| U.S. Small Cap | 3.2 |
| Exchange-Traded Equity Funds | 1.0 |
| U.S. Large Cap | 1.0 |
| Exchange-Traded Fixed Income Funds | 7.4 |
| Investment Grade | 7.4 |
| Fixed Income Funds | 10.2 |
| Investment Grade | 10.2 |
| Allocations to Tactical Assets | |
| Money Market Fund Shares Held to Cover Open Derivatives Instruments(a) | 12.9 |
| Options Purchased Puts | 1.6 |
| Residential Mortgage-Backed Securities - Agency | 14.2 |
| Total | 100.0 |
| (a) | Includes investments in Money Market Funds (amounting to $1.6 billion) which have been segregated to cover obligations relating to the Fund’s investment in derivatives as part of its tactical allocation strategy. For a description of the Fund’s investments in derivatives, see Investments in derivatives following the Portfolio of Investments and Note 2 to the Notes to Financial Statements. |
Percentages indicated are based upon
total investments including options purchased and excluding all other investments in derivatives, if any. The Fund’s portfolio composition is subject to change.
| 4 | Variable Portfolio – Managed Volatility Growth Fund | Semiannual Report 2020 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount 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 results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
In addition to the ongoing expenses
which the Fund bears directly, the Fund’s shareholders indirectly bear the Fund’s allocable share of the costs and expenses of each underlying fund in which the Fund invests. You can also estimate the
effective expenses paid during the period, which includes the indirect fees associated with investing in the underlying funds, by using the amounts listed in the "Effective expenses paid during the period" column.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
| January 1, 2020 — June 30, 2020 | ||||||||||
| Account value at the beginning of the period ($) | Account value at the end of the period ($) | Expenses paid during the period ($) | Fund’s annualized expense ratio (%) | Effective expenses paid during the period ($) | Fund’s effective annualized expense ratio (%) | |||||
| Actual | Hypothetical | Actual | Hypothetical | Actual | Hypothetical | Actual | Actual | Hypothetical | Actual | |
| Class 1 | 1,000.00 | 1,000.00 | 980.60 | 1,023.62 | 1.23 | 1.26 | 0.25 | 3.79 | 3.87 | 0.77 |
| Class 2 | 1,000.00 | 1,000.00 | 979.30 | 1,022.38 | 2.46 | 2.51 | 0.50 | 5.02 | 5.13 | 1.02 |
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 366.
Effective expenses paid during the
period and the Fund’s effective annualized expense ratio include expenses borne directly to the class plus the Fund’s pro rata portion of the ongoing expenses charged by the underlying funds using the
expense ratio of each class of the underlying funds as of the underlying fund’s most recent shareholder report.
| Variable Portfolio – Managed Volatility Growth Fund | Semiannual Report 2020 | 5 |
Portfolio of Investments
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 6 | Variable Portfolio – Managed Volatility Growth Fund | Semiannual Report 2020 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
At June 30, 2020,
securities and/or cash totaling $207,623,140 were pledged as collateral.
Investments in
derivatives
| Long futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| Australian Dollar | 68 | 09/2020 | USD | 4,692,000 | — | (83,212) |
| British Pound | 88 | 09/2020 | USD | 6,818,350 | — | (185,734) |
| DAX Index | 35 | 09/2020 | EUR | 10,784,813 | 298,739 | — |
| FTSE/MIB Index | 88 | 09/2020 | EUR | 8,487,160 | 275,147 | — |
| Japanese Yen | 259 | 09/2020 | USD | 30,014,863 | 80,303 | — |
| MSCI Singapore Index | 205 | 07/2020 | SGD | 6,064,925 | — | (69,944) |
| S&P 500 Index E-mini | 5,302 | 09/2020 | USD | 819,212,020 | 22,927,816 | — |
| SPI 200 Index | 183 | 09/2020 | AUD | 26,955,900 | 324,862 | — |
| TOPIX Index | 69 | 09/2020 | JPY | 1,075,365,000 | — | (430,917) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – Managed Volatility Growth Fund | Semiannual Report 2020 | 7 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
| Long futures contracts (continued) | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| U.S. Long Bond | 1,723 | 09/2020 | USD | 307,663,188 | 769,055 | — |
| U.S. Treasury 10-Year Note | 3,614 | 09/2020 | USD | 502,967,156 | 1,285,994 | — |
| U.S. Treasury 2-Year Note | 2,195 | 09/2020 | USD | 484,717,737 | 153,234 | — |
| U.S. Treasury 5-Year Note | 3,854 | 09/2020 | USD | 484,610,393 | 952,397 | — |
| U.S. Ultra Treasury Bond | 100 | 09/2020 | USD | 21,815,625 | 81,817 | — |
| U.S. Ultra Treasury Bond | 373 | 09/2020 | USD | 81,372,281 | — | (139,691) |
| Total | 27,149,364 | (909,498) | ||||
| Short futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| Canadian Dollar | (160) | 09/2020 | USD | (11,779,200) | 193,328 | — |
| Euro FX | (178) | 09/2020 | USD | (25,039,038) | — | (46,578) |
| EURO STOXX 50 Index | (1,521) | 09/2020 | EUR | (49,021,830) | — | (1,866,814) |
| FTSE 100 Index | (437) | 09/2020 | GBP | (26,864,575) | — | (405,320) |
| Hang Seng Index | (401) | 07/2020 | HKD | (486,152,350) | 207,254 | — |
| New Zealand Dollar | (50) | 09/2020 | USD | (3,227,500) | 52,565 | — |
| OMXS30 Index | (4,503) | 07/2020 | SEK | (750,312,375) | — | (3,428,794) |
| Russell 2000 Index E-mini | (2,905) | 09/2020 | USD | (208,811,400) | — | (12,193,679) |
| S&P 500 Index E-mini | (4,324) | 09/2020 | USD | (668,101,240) | — | (15,025,283) |
| S&P/TSX 60 Index | (650) | 09/2020 | CAD | (120,705,000) | — | (2,707,779) |
| Swiss Franc | (50) | 09/2020 | USD | (6,612,500) | — | (61,122) |
| Total | 453,147 | (35,735,369) | ||||
| Put option contracts purchased | ||||||||
| Description | Counterparty | Trading currency | Notional amount | Number of contracts | Exercise price/Rate | Expiration date | Cost ($) | Value ($) |
| S&P 500 Index | JPMorgan | USD | 1,348,626,150 | 4,350 | 2,500.00 | 12/17/2021 | 73,378,025 | 79,822,500 |
| S&P 500 Index | JPMorgan | USD | 1,010,694,540 | 3,260 | 2,600.00 | 12/17/2021 | 56,154,183 | 73,578,200 |
| S&P 500 Index | JPMorgan | USD | 1,023,095,700 | 3,300 | 2,400.00 | 12/17/2021 | 61,919,172 | 52,602,000 |
| Total | 191,451,380 | 206,002,700 | ||||||
| Cleared credit default swap contracts - sell protection | ||||||||||||
| Reference entity | Counterparty | Maturity date | Receive fixed rate (%) | Payment frequency | Implied credit spread (%)* | Notional currency | Notional amount | Value ($) | Upfront payments ($) | Upfront receipts ($) | Unrealized appreciation ($) | Unrealized depreciation ($) |
| Markit CDX North America Investment Grade Index, Series 34 | Morgan Stanley | 06/20/2025 | 1.000 | Quarterly | 0.762 | USD | 150,000,000 | 1,563,588 | — | — | 1,563,588 | — |
| * | Implied credit spreads, represented in absolute terms, utilized in determining the market value of credit default swap agreements on corporate or sovereign issues as of period end serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement. |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 8 | Variable Portfolio – Managed Volatility Growth Fund | Semiannual Report 2020 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Notes to Portfolio of
Investments
| (a) | As defined in the Investment Company Act of 1940, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the period ended June 30, 2020 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.253% | ||||||||
| 1,764,411,758 | 2,506,620,348 | (2,641,936,539) | 291,506 | 1,629,387,073 | (25,609) | 8,255,223 | 1,629,387,073 | |
| Columbia Variable Portfolio – Contrarian Core Fund, Class 1 Shares | ||||||||
| 390,186,423 | — | (19,142,421) | (18,082,544) | 352,961,458 | 12,625,330 | — | 13,384,962 | |
| Columbia Variable Portfolio – Disciplined Core Fund, Class 1 Shares | ||||||||
| 1,132,525,668 | 176,045 | (37,357,344) | (50,792,338) | 1,044,552,031 | 20,369,864 | — | 18,357,681 | |
| Columbia Variable Portfolio – Dividend Opportunity Fund, Class 1 Shares | ||||||||
| 267,859,700 | 1,851,869 | (28,258) | (34,860,757) | 234,822,554 | 10,891 | — | 9,129,959 | |
| Columbia Variable Portfolio – Intermediate Bond Fund, Class 1 Shares | ||||||||
| 225,401,811 | 111,261 | (15,115,458) | 13,467,284 | 223,864,898 | 868,096 | — | 19,706,417 | |
| Columbia Variable Portfolio – Large Cap Growth Fund, Class 1 Shares | ||||||||
| 362,858,624 | — | (33,888,372) | 9,047,725 | 338,017,977 | 25,824,698 | — | 13,979,238 | |
| Columbia Variable Portfolio – Limited Duration Credit Fund, Class 1 Shares | ||||||||
| 66,178,417 | 58,923 | (3,153,994) | 2,209,759 | 65,293,105 | (176,273) | — | 6,483,923 | |
| Columbia Variable Portfolio – Long Government/Credit Bond Fund, Class 1 Shares | ||||||||
| 129,570,915 | 759 | (16,119,753) | 14,699,710 | 128,151,631 | 2,787,202 | — | 10,235,753 | |
| Columbia Variable Portfolio – Mid Cap Growth Fund, Class 1 Shares | ||||||||
| 99,645,919 | — | (6,946,422) | 812,590 | 93,512,087 | 3,216,976 | — | 2,697,983 | |
| Columbia Variable Portfolio – Overseas Core Fund, Class 1 Shares | ||||||||
| — | 403,585,146 | — | (4,951,237) | 398,633,909 | — | 2,035,062 | 33,955,188 | |
| Columbia Variable Portfolio - Select Large Cap Equity Fund, Class 1 Shares | ||||||||
| 188,877,177 | — | (12,935,472) | (2,736,641) | 173,205,064 | 2,397,964 | — | 14,591,834 | |
| Columbia Variable Portfolio – Select Large Cap Value Fund, Class 1 Shares | ||||||||
| 233,488,450 | 1,167,128 | (14,890,120) | (35,678,879) | 184,086,579 | 3,872,679 | — | 7,810,207 | |
| Columbia Variable Portfolio – Select Mid Cap Value Fund, Class 1 Shares | ||||||||
| 97,278,851 | 3,001,364 | (233,085) | (19,054,243) | 80,992,887 | 27,480 | — | 3,910,810 | |
| Columbia Variable Portfolio - Small Cap Value Fund, Class 1 Shares | ||||||||
| 57,290,453 | 921,955 | — | (11,723,333) | 46,489,075 | — | — | 3,743,082 | |
| Columbia Variable Portfolio - Small Company Growth Fund, Class 1 Shares | ||||||||
| 56,471,831 | 565,474 | — | 11,602,256 | 68,639,561 | — | — | 3,202,966 | |
| Columbia Variable Portfolio – U.S. Equities Fund, Class 1 Shares† | ||||||||
| 14,054,428 | — | (8,928,153) | (5,126,275) | — | 761,962 | — | — | |
| Columbia Variable Portfolio – U.S. Government Mortgage Fund, Class 1 Shares | ||||||||
| 66,225,640 | 57,984 | (3,170,707) | 1,943,001 | 65,055,918 | 86,487 | — | 5,941,180 | |
| CTIVP® – American Century Diversified Bond Fund, Class 1 Shares | ||||||||
| 159,176,943 | 64,571 | (9,651,155) | 6,557,872 | 156,148,231 | 209,536 | — | 13,589,924 | |
| CTIVP® – Lazard International Equity Advantage Fund, Class 1 Shares | ||||||||
| 707,034,872 | 18,608,180 | (355,126,846) | (48,242,226) | 322,273,980 | (42,371,846) | 1,057,280 | 33,292,766 | |
| CTIVP® – Loomis Sayles Growth Fund, Class 1 Shares | ||||||||
| 328,750,610 | — | (25,546,079) | 4,852,675 | 308,057,206 | 25,153,901 | — | 7,468,053 | |
| CTIVP® – Los Angeles Capital Large Cap Growth Fund, Class 1 Shares | ||||||||
| 332,019,486 | — | (31,996,822) | 10,482,059 | 310,504,723 | 17,296,766 | — | 8,164,731 | |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – Managed Volatility Growth Fund | Semiannual Report 2020 | 9 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Notes
to Portfolio of Investments (continued)
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| CTIVP® – MFS® Value Fund, Class 1 Shares | ||||||||
| 204,945,854 | 2,767,046 | (32,277) | (26,438,653) | 181,241,970 | 744 | — | 7,149,585 | |
| CTIVP® – Morgan Stanley Advantage Fund, Class 1 Shares | ||||||||
| 317,566,138 | — | (40,699,011) | 57,378,735 | 334,245,862 | 37,348,751 | — | 7,090,493 | |
| CTIVP® – T. Rowe Price Large Cap Value Fund, Class 1 Shares | ||||||||
| 194,870,920 | 5,987,129 | — | (35,243,501) | 165,614,548 | — | — | 7,753,490 | |
| CTIVP® – TCW Core Plus Bond Fund, Class 1 Shares | ||||||||
| 243,997,330 | 70,917 | (17,628,426) | 13,315,347 | 239,755,168 | 1,413,873 | — | 20,509,424 | |
| CTIVP® – Victory Sycamore Established Value Fund, Class 1 Shares | ||||||||
| 140,769,178 | 3,334,238 | (845,487) | (20,123,335) | 123,134,594 | 72,571 | — | 4,765,271 | |
| CTIVP® – Wells Fargo Short Duration Government Fund, Class 1 Shares | ||||||||
| 22,538,267 | 94,324 | (230,043) | 697,157 | 23,099,705 | 3,515 | — | 2,179,218 | |
| CTIVP® – Westfield Mid Cap Growth Fund, Class 1 Shares | ||||||||
| 152,211,685 | 64,073 | (11,527,671) | (7,765,027) | 132,983,060 | 7,165,310 | — | 4,155,721 | |
| Variable Portfolio - Partners Core Bond Fund, Class 1 Shares | ||||||||
| 393,856,381 | 142,303 | (27,486,808) | 21,751,975 | 388,263,851 | 1,420,352 | — | 32,848,042 | |
| Variable Portfolio - Partners Core Equity Fund, Class 1 Shares | ||||||||
| 439,791,573 | 245,729 | (11,910,713) | (23,996,846) | 404,129,743 | 4,628,002 | — | 17,748,342 | |
| Variable Portfolio - Partners International Core Equity Fund, Class 1 Shares | ||||||||
| 716,487,338 | 20,171,943 | (62,380,289) | (61,353,896) | 612,925,096 | (13,080,289) | 1,396,561 | 62,415,998 | |
| Variable Portfolio - Partners International Growth Fund, Class 1 Shares | ||||||||
| 272,553,406 | 6,533,865 | (45,842,700) | (5,086,938) | 228,157,633 | (3,866,080) | 565,700 | 20,666,452 | |
| Variable Portfolio - Partners International Value Fund, Class 1 Shares | ||||||||
| 258,520,062 | 25,541,420 | — | (56,635,907) | 227,425,575 | — | 1,545,438 | 30,242,763 | |
| Variable Portfolio – Partners Small Cap Growth Fund, Class 1 Shares | ||||||||
| 145,554,659 | 13,751,805 | — | 2,816,016 | 162,122,480 | — | — | 6,438,542 | |
| Variable Portfolio – Partners Small Cap Value Fund, Class 1 Shares | ||||||||
| 134,402,018 | 16,039,470 | — | (28,269,486) | 122,172,002 | — | — | 5,451,673 | |
| Total | 10,317,372,785 | (324,236,394) | 9,569,921,234 | 108,022,856 | 14,855,264 | |||
| † | Issuer was not an affiliate at the end of period. |
| (b) | Non-income producing investment. |
| (c) | Represents a security purchased on a when-issued basis. |
| (d) | The rate shown is the seven-day current annualized yield at June 30, 2020. |
Abbreviation Legend
| TBA | To Be Announced |
Currency Legend
| AUD | Australian Dollar |
| CAD | Canada Dollar |
| EUR | Euro |
| GBP | British Pound |
| HKD | Hong Kong Dollar |
| JPY | Japanese Yen |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 10 | Variable Portfolio – Managed Volatility Growth Fund | Semiannual Report 2020 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Currency Legend (continued)
| SEK | Swedish Krona |
| SGD | Singapore Dollar |
| USD | US Dollar |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Certain investments that have been
measured at fair value using the net asset value (NAV) per share (or its equivalent) are not categorized in the fair value hierarchy. The fair value amounts presented in the table are intended to reconcile the fair
value hierarchy to the amounts presented in the Portfolio of Investments. The Variable Portfolios serve as investment vehicles for variable annuity contracts and variable life insurance policies. Principle investment
strategies within these Variable Portfolios vary based on the Portfolios investment objective. Investments in the Variable Portfolios may be redeemed on a daily basis without restriction.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at June 30, 2020:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Assets at NAV ($) | Total ($) | |
| Investments in Securities | |||||
| Equity Funds | — | — | — | 6,650,901,654 | 6,650,901,654 |
| Exchange-Traded Equity Funds | 127,445,188 | — | — | — | 127,445,188 |
| Exchange-Traded Fixed Income Funds | 929,687,499 | — | — | — | 929,687,499 |
| Fixed Income Funds | — | — | — | 1,289,632,507 | 1,289,632,507 |
| Residential Mortgage-Backed Securities - Agency | — | 1,792,513,718 | — | — | 1,792,513,718 |
| Options Purchased Puts | 206,002,700 | — | — | — | 206,002,700 |
| Money Market Funds | 1,629,387,073 | — | — | — | 1,629,387,073 |
| Total Investments in Securities | 2,892,522,460 | 1,792,513,718 | — | 7,940,534,161 | 12,625,570,339 |
| Investments in Derivatives | |||||
| Asset | |||||
| Futures Contracts | 27,602,511 | — | — | — | 27,602,511 |
| Swap Contracts | — | 1,563,588 | — | — | 1,563,588 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – Managed Volatility Growth Fund | Semiannual Report 2020 | 11 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Fair value measurements (continued)
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Assets at NAV ($) | Total ($) | |
| Liability | |||||
| Futures Contracts | (36,644,867) | — | — | — | (36,644,867) |
| Total | 2,883,480,104 | 1,794,077,306 | — | 7,940,534,161 | 12,618,091,571 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The Fund’s assets assigned to
the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical
assets.
Futures contracts and swap contracts
are valued at unrealized appreciation (depreciation).
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 12 | Variable Portfolio – Managed Volatility Growth Fund | Semiannual Report 2020 |
Statement of Assets and Liabilities
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $2,751,790,250) | $2,849,646,405 |
| Affiliated issuers (cost $7,713,535,080) | 9,569,921,234 |
| Options purchased (cost $191,451,380) | 206,002,700 |
| Cash collateral held at broker for: | |
| TBA | 1,408,000 |
| Margin deposits on: | |
| Futures contracts | 200,566,000 |
| Swap contracts | 5,649,139 |
| Receivable for: | |
| Investments sold | 7,149,696 |
| Capital shares sold | 138 |
| Dividends | 926,711 |
| Interest | 1,977,074 |
| Variation margin for futures contracts | 12,482,053 |
| Variation margin for swap contracts | 208,660 |
| Trustees’ deferred compensation plan | 360,730 |
| Total assets | 12,856,298,540 |
| Liabilities | |
| Payable for: | |
| Investments purchased on a delayed delivery basis | 1,794,609,851 |
| Capital shares purchased | 10,213,990 |
| Variation margin for futures contracts | 14,531,832 |
| Management services fees | 56,829 |
| Distribution and/or service fees | 74,940 |
| Service fees | 543,022 |
| Compensation of board members | 14,353 |
| Compensation of chief compliance officer | 1,009 |
| Other expenses | 73,991 |
| Trustees’ deferred compensation plan | 360,730 |
| Total liabilities | 1,820,480,547 |
| Net assets applicable to outstanding capital stock | $11,035,817,993 |
| Represented by | |
| Trust capital | $11,035,817,993 |
| Total - representing net assets applicable to outstanding capital stock | $11,035,817,993 |
| Class 1 | |
| Net assets | $3,499,304 |
| Shares outstanding | 238,613 |
| Net asset value per share | $14.67 |
| Class 2 | |
| Net assets | $11,032,318,689 |
| Shares outstanding | 753,263,430 |
| Net asset value per share | $14.65 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – Managed Volatility Growth Fund | Semiannual Report 2020 | 13 |
Statement of Operations
Six Months Ended June 30, 2020 (Unaudited)
Six Months Ended June 30, 2020 (Unaudited)
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $9,191,544 |
| Dividends — affiliated issuers | 14,855,264 |
| Interest | 393,962 |
| Total income | 24,440,770 |
| Expenses: | |
| Management services fees | 9,948,586 |
| Distribution and/or service fees | |
| Class 2 | 13,483,415 |
| Service fees | 3,236,104 |
| Compensation of board members | 75,235 |
| Custodian fees | 19,631 |
| Printing and postage fees | 59,708 |
| Audit fees | 19,642 |
| Legal fees | 133,777 |
| Compensation of chief compliance officer | 1,962 |
| Other | 111,238 |
| Total expenses | 27,089,298 |
| Net investment loss | (2,648,528) |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 86,887,510 |
| Investments — affiliated issuers | 108,022,856 |
| Capital gain distributions from underlying affiliated funds | 9,533,724 |
| Foreign currency translations | 609,247 |
| Futures contracts | (318,973,951) |
| Options purchased | 329,156,626 |
| Swap contracts | 246,233 |
| Net realized gain | 215,482,245 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | (134,887,966) |
| Investments — affiliated issuers | (324,236,394) |
| Foreign currency translations | 534,945 |
| Futures contracts | (51,150,845) |
| Options purchased | 49,019,970 |
| Swap contracts | 1,563,588 |
| Net change in unrealized appreciation (depreciation) | (459,156,702) |
| Net realized and unrealized loss | (243,674,457) |
| Net decrease in net assets resulting from operations | $(246,322,985) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 14 | Variable Portfolio – Managed Volatility Growth Fund | Semiannual Report 2020 |
Statement of Changes in Net Assets
| Six Months Ended June 30, 2020 (Unaudited) | Year Ended December 31, 2019 | |
| Operations | ||
| Net investment income (loss) | $(2,648,528) | $98,164,055 |
| Net realized gain | 215,482,245 | 134,809,608 |
| Net change in unrealized appreciation (depreciation) | (459,156,702) | 1,548,835,619 |
| Net increase (decrease) in net assets resulting from operations | (246,322,985) | 1,781,809,282 |
| Decrease in net assets from capital stock activity | (170,003,439) | (149,973,121) |
| Total increase (decrease) in net assets | (416,326,424) | 1,631,836,161 |
| Net assets at beginning of period | 11,452,144,417 | 9,820,308,256 |
| Net assets at end of period | $11,035,817,993 | $11,452,144,417 |
| Six Months Ended | Year Ended | |||
| June 30, 2020 (Unaudited) | December 31, 2019 (a) | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 128,831 | 1,859,708 | 138,161 | 1,973,792 |
| Redemptions | (22,856) | (333,062) | (5,523) | (76,936) |
| Net increase | 105,975 | 1,526,646 | 132,638 | 1,896,856 |
| Class 2 | ||||
| Subscriptions | 3,880,411 | 53,102,299 | 11,338,956 | 159,797,469 |
| Redemptions | (15,862,441) | (224,632,384) | (22,198,942) | (311,667,446) |
| Net decrease | (11,982,030) | (171,530,085) | (10,859,986) | (151,869,977) |
| Total net decrease | (11,876,055) | (170,003,439) | (10,727,348) | (149,973,121) |
| (a) | Class 1 shares are based on operations from February 20, 2019 (commencement of operations) through the stated period end. |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – Managed Volatility Growth Fund | Semiannual Report 2020 | 15 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income | Net realized and unrealized gain (loss) | Total from investment operations | |
| Class 1 | ||||
| Six Months Ended 6/30/2020 (Unaudited) | $14.96 | 0.01 | (0.30) | (0.29) |
| Year Ended 12/31/2019(d) | $13.62 | 0.11 | 1.23 | 1.34 |
| Class 2 | ||||
| Six Months Ended 6/30/2020 (Unaudited) | $14.96 | (0.00) | (0.31) | (0.31) |
| Year Ended 12/31/2019 | $12.65 | 0.13 | 2.18 | 2.31 |
| Year Ended 12/31/2018 | $13.71 | 0.09 | (1.15) | (1.06) |
| Year Ended 12/31/2017 | $11.67 | 0.05 | 1.99 | 2.04 |
| Year Ended 12/31/2016 | $11.29 | 0.04 | 0.34 | 0.38 |
| Year Ended 12/31/2015 | $11.68 | 0.03 | (0.42) | (0.39) |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Annualized. |
| (d) | Class 1 shares commenced operations on February 20, 2019. Per share data and total return reflect activity from that date. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 16 | Variable Portfolio – Managed Volatility Growth Fund | Semiannual Report 2020 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income (loss) ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Six Months Ended 6/30/2020 (Unaudited) | $14.67 | (1.94%) | 0.25%(c) | 0.25%(c) | 0.21%(c) | 91% | $3,499 |
| Year Ended 12/31/2019(d) | $14.96 | 9.84% | 0.25%(c) | 0.25%(c) | 0.88%(c) | 128% | $1,985 |
| Class 2 | |||||||
| Six Months Ended 6/30/2020 (Unaudited) | $14.65 | (2.07%) | 0.50%(c) | 0.50%(c) | (0.05%)(c) | 91% | $11,032,319 |
| Year Ended 12/31/2019 | $14.96 | 18.26% | 0.49% | 0.49% | 0.91% | 128% | $11,450,160 |
| Year Ended 12/31/2018 | $12.65 | (7.73%) | 0.49% | 0.49% | 0.65% | 74% | $9,820,308 |
| Year Ended 12/31/2017 | $13.71 | 17.48% | 0.48% | 0.48% | 0.42% | 83% | $10,121,668 |
| Year Ended 12/31/2016 | $11.67 | 3.37% | 0.47% | 0.47% | 0.37% | 91% | $8,232,846 |
| Year Ended 12/31/2015 | $11.29 | (3.34%) | 0.48% | 0.48% | 0.29% | 74% | $7,441,534 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – Managed Volatility Growth Fund | Semiannual Report 2020 | 17 |
Notes to Financial Statements
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Note 1. Organization
Variable Portfolio –
Managed Volatility Growth Fund (the Fund), a series of Columbia Funds Variable Insurance Trust (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940
Act), as an open-end management investment company organized as a Massachusetts business trust.
The Fund is a
“fund-of-funds”, investing significantly in affiliated funds managed by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc.
(Ameriprise Financial), its affiliates, or third-party advised (unaffiliated) funds, including exchange-traded funds (collectively, Underlying Funds). The Fund is exposed to the same risks as the Underlying Funds in
direct proportion to the allocation of its assets among the Underlying Funds. For information on the investment strategies and risks of the Underlying Funds, please refer to the Fund’s current prospectus and the
prospectuses of the Underlying Funds, which are available, free of charge, from the Securities and Exchange Commission website at www.sec.gov.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1 and Class 2 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued by
affiliated life insurance companies (Participating Insurance Companies) and other qualified institutional investors (Qualified Investors) authorized by Columbia Management Investment Distributors, Inc. (the
Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by buying a Contract.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on any
exchange are valued at the mean between the closing bid and asked prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Asset- and mortgage-backed
securities are generally valued by pricing services, which utilize pricing models that incorporate the securities’ cash flow and loan performance data. These models also take into account available market data,
including trades, market quotations, and benchmark yield curves for identical or similar securities. Factors used to identify similar securities may include, but are not limited to, issuer, collateral type, vintage,
prepayment speeds, collateral performance, credit ratings, credit enhancement and expected life. Asset-backed securities for which quotations are readily available may also be valued based upon an over-the-counter or
exchange bid quote from an approved independent broker-dealer.
Investments in the Underlying Funds
(other than ETFs) are valued at the latest net asset value reported by those companies as of the valuation time.
Futures and options on futures
contracts are valued based upon the settlement price at the close of regular trading on their principal exchanges or, in the absence of transactions, at the mean of the latest quoted bid and ask prices.
| 18 | Variable Portfolio – Managed Volatility Growth Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Option contracts are valued at the
mean of the latest quoted bid and ask prices on their primary exchanges. Option contracts, including over-the-counter option contracts, with no readily available market quotations are valued using mid-market
evaluations from independent third-party vendors.
Swap transactions are valued
through an independent pricing service or broker, or if neither is available, through an internal model based upon observable inputs.
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Foreign currency transactions and
translations
The values of all assets and
liabilities denominated in foreign currencies are generally translated into U.S. dollars at exchange rates determined at the close of regular trading on the New York Stock Exchange. Net realized and unrealized gains
(losses) on foreign currency transactions and translations include gains (losses) arising from the fluctuation in exchange rates between trade and settlement dates on securities transactions, gains (losses) arising
from the disposition of foreign currency and currency gains (losses) between the accrual and payment dates on dividends, interest income and foreign withholding taxes.
For financial statement purposes,
the Fund does not distinguish that portion of gains (losses) on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations
are included with the net realized and unrealized gains (losses) on investments in the Statement of Operations.
Derivative instruments
The Fund invests in certain
derivative instruments, as detailed below, to meet its investment objectives. Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more securities,
currencies, commodities, indices, or other assets or instruments. Derivatives may be used to increase investment flexibility (including to maintain cash reserves while maintaining desired exposure to certain assets),
for risk management (hedging) purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain investment risks,
such as foreign currency exchange rate risk, interest rate risk and credit risk. Derivatives may involve various risks, including the potential inability of the counterparty to fulfill its obligations under the terms
of the contract, the potential for an illiquid secondary market (making it difficult for the Fund to sell or terminate, including at favorable prices) and the potential for market movements which may expose the Fund
to gains or losses in excess of the amount shown in the Statement of Assets and Liabilities. The notional amounts of derivative instruments, if applicable, are not recorded in the financial statements.
A derivative instrument may suffer
a marked-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform its
obligations under the contract. The Fund’s risk of loss from counterparty credit risk on over-the-counter derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by
the Fund and the amount of any variation margin held by the counterparty, plus any replacement costs or related amounts. With exchange-traded or centrally cleared derivatives, there is reduced counterparty credit risk
to the Fund since the clearinghouse or central counterparty (CCP) provides some protection in the case of clearing member default. The clearinghouse or CCP stands between the buyer and the seller of the contract;
therefore, additional counterparty credit risk is failure of the clearinghouse or CCP. However, credit risk still exists in exchange-traded or centrally cleared derivatives with respect to initial and variation margin
that is held
| Variable Portfolio – Managed Volatility Growth Fund | Semiannual Report 2020 | 19 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
in a broker’s customer account. While
brokers are required to segregate customer margin from their own assets, in the event that a broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin
held by the broker for all its clients, U.S. bankruptcy laws will typically allocate that shortfall on a pro-rata basis across all the broker’s customers (including the Fund), potentially resulting in losses to
the Fund.
In order to better define its
contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement)
or similar agreement with its derivatives contract counterparties. An ISDA Master Agreement is an agreement between the Fund and a counterparty that governs over-the-counter derivatives and typically contains, among
other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset with the counterparty
certain derivative instrument’s payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment
in the event of default (close-out netting), including the bankruptcy or insolvency of the counterparty. Note, however, that bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or
prohibitions against the right of offset or netting in bankruptcy, insolvency or other events.
Collateral (margin) requirements
differ by type of derivative. Margin requirements are established by the clearinghouse or CCP for exchange-traded and centrally cleared derivatives. Brokers can ask for margin in excess of the minimum in certain
circumstances. Collateral terms are contract specific for over-the-counter derivatives. For over-the-counter derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by
netting the marked-to-market amount for each transaction under such agreement and comparing that amount to the value of any variation margin currently pledged by the Fund and/or the counterparty. Generally, the amount
of collateral due from or to a party has to exceed a minimum transfer amount threshold (e.g., $250,000) before a transfer has to be made. To the extent amounts due to the Fund from its counterparties are not fully
collateralized, contractually or otherwise, the Fund bears the risk of loss from counterparty nonperformance. The Fund may also pay interest expense on cash collateral received from the broker. Any interest expense
paid by the Fund is shown on the Statement of Operations. The Fund attempts to mitigate counterparty risk by only entering into agreements with counterparties that it believes have the financial resources to honor
their obligations and by monitoring the financial stability of those counterparties.
Certain ISDA Master Agreements
allow counterparties of over-the-counter derivatives transactions to terminate derivatives contracts prior to maturity in the event the Fund’s net asset value declines by a stated percentage over a specified
time period or if the Fund fails to meet certain terms of the ISDA Master Agreement, which would cause the Fund to accelerate payment of any net liability owed to the counterparty. The Fund also has termination rights
if the counterparty fails to meet certain terms of the ISDA Master Agreement. In determining whether to exercise such termination rights, the Fund would consider, in addition to counterparty credit risk, whether
termination would result in a net liability owed from the counterparty.
For financial reporting purposes,
the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statement of Assets and Liabilities.
Futures contracts
Futures contracts are
exchange-traded and represent commitments for the future purchase or sale of an asset at a specified price on a specified date. The Fund bought and sold futures contracts to produce incremental earnings, to manage the
duration and yield curve exposure of the Fund versus the benchmark, to manage exposure to movements in interest rates, to manage exposure to the securities market and to maintain appropriate equity market exposure
while keeping sufficient cash to accommodate daily redemptions. These instruments may be used for other purposes in future periods. Upon entering into futures contracts, the Fund bears risks that it may not achieve
the anticipated benefits of the futures contracts and may realize a loss. Additional risks include counterparty credit risk, the possibility of an illiquid market, and that a change in the value of the contract or
option may not correlate with changes in the value of the underlying asset.
Upon entering into a futures
contract, the Fund deposits cash or securities with the broker, known as a futures commission merchant (FCM), in an amount sufficient to meet the initial margin requirement. The initial margin deposit must be
maintained at an established level over the life of the contract. Cash deposited as initial margin is recorded in the Statement of Assets and Liabilities as margin deposits. Securities deposited as initial margin are
designated in the Portfolio of Investments. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are
| 20 | Variable Portfolio – Managed Volatility Growth Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
equal to the daily change in the contract value
and are recorded as variation margin receivable or payable and are offset in unrealized gains or losses. The Fund recognizes a realized gain or loss when the contract is closed or expires. Futures contracts involve,
to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities.
Options contracts
Options are contracts which entitle
the holder to purchase or sell securities or other identified assets at a specified price, or in the case of index option contracts, to receive or pay the difference between the index value and the strike price of the
index option contract. Option contracts can be either exchange-traded or over-the-counter. The Fund purchased option contracts to produce incremental earnings, to decrease the Fund’s exposure to equity market
risk and to increase return on investments and to facilitate buying and selling of securities for investments. These instruments may be used for other purposes in future periods. Completion of transactions for option
contracts traded in the over-the-counter market depends upon the performance of the other party. Cash collateral may be collected or posted by the Fund to secure certain over-the-counter option contract trades. Cash
collateral held or posted by the Fund for such option contract trades must be returned to the broker or the Fund upon closure, exercise or expiration of the contract.
Options contracts purchased are
recorded as investments. When the Fund writes an options contract, the premium received is recorded as an asset and an amount equivalent to the premium is recorded as a liability in the Statement of Assets and
Liabilities and is subsequently adjusted to reflect the current fair value of the option written. Changes in the fair value of the written option are recorded as unrealized appreciation or depreciation until the
contract is exercised or has expired. The Fund will realize a gain or loss when the option contract is closed or expires. When option contracts are exercised, the proceeds on sales for a written call or purchased put
option contract, or the purchase cost for a written put or purchased call option contract, is adjusted by the amount of premium received or paid.
For over-the-counter options
purchased, the Fund bears the risk of loss of the amount of the premiums paid plus the positive change in market values net of any collateral held by the Fund should the counterparty fail to perform under the
contracts. Option contracts written by the Fund do not typically give rise to significant counterparty credit risk, as options written generally obligate the Fund and not the counterparty to perform. The risk in
writing a call option contract is that the Fund gives up the opportunity for profit if the market price of the security increases above the strike price and the option contract is exercised. The risk in writing a put
option contract is that the Fund may incur a loss if the market price of the security decreases below the strike price and the option contract is exercised. Exercise of a written option could result in the Fund
purchasing or selling a security or foreign currency when it otherwise would not, or at a price different from the current market value. In purchasing and writing options, the Fund bears the risk of an unfavorable
change in the value of the underlying instrument or the risk that the Fund may not be able to enter into a closing transaction due to an illiquid market.
Swap contracts
Swap contracts are negotiated in
the over-the-counter market and may be entered into as a bilateral contract or centrally cleared (centrally cleared swap contract). In a centrally cleared swap contract, immediately following execution of the swap
contract with a broker, the swap contract is novated to a central counterparty (the CCP) and the CCP becomes the Fund’s counterparty to the centrally cleared swap contract. The Fund is required to deposit
initial margin with the futures commission merchant (FCM), which pledges it through to the CCP in the form of cash or securities in an amount that varies depending on the size and risk profile of the particular swap
contract. Securities deposited as initial margin are designated in the Portfolio of Investments and cash deposited is recorded in the Statement of Assets and Liabilities as margin deposits. Unlike a bilateral swap
contract, for centrally cleared swap contracts, the Fund has minimal credit exposure to the FCM because the CCP stands between the Fund and the relevant buyer/seller on the other side of the contract. Swap contracts
are marked-to-market daily and changes in value are recorded as unrealized appreciation (depreciation). The daily change in valuation of centrally cleared swap contracts, if any, is recorded as a receivable or payable
for variation margin in the Statement of Assets and Liabilities.
| Variable Portfolio – Managed Volatility Growth Fund | Semiannual Report 2020 | 21 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Entering into these contracts
involves, to varying degrees, elements of interest, liquidity and counterparty credit risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that there
may be unfavorable changes in interest rates, market conditions or other conditions, that it may be difficult to initiate a swap transaction or liquidate a position at an advantageous time or price which may result in
significant losses, and that the FCM or CCP may not fulfill its obligation under the contract.
Credit default swap contracts
The Fund entered into credit
default swap contracts to increase or decrease its credit exposure to an index and to manage credit risk exposure. These instruments may be used for other purposes in future periods. Credit default swap contracts are
agreements in which one party pays fixed periodic payments to a counterparty in consideration for an agreement from the counterparty to make a specific payment should a specified credit event(s) take place. Although
specified credit events are contract specific, credit events are generally defined as bankruptcy, failure to pay, restructuring, obligation acceleration, obligation default, or repudiation/moratorium.
As the purchaser of a credit
default swap contract, the Fund purchases protection by paying a periodic interest rate on the notional amount to the counterparty. The interest amount is accrued daily as a component of unrealized appreciation
(depreciation) and is recorded as a realized loss upon payment. If a credit event as specified in the contract occurs, the Fund may have the option either to deliver the reference obligation to the seller in exchange
for a cash payment of its par amount, or to receive a net cash settlement equal to the par amount less an agreed-upon value of the reference obligation as of the date of the credit event. The difference between the
value of the obligation or cash delivered and the notional amount received will be recorded as a realized gain (loss).
As the seller of a credit default
swap contract, the Fund sells protection to a buyer and will generally receive a periodic interest rate on a notional amount. The interest amount is accrued daily as a component of unrealized appreciation
(depreciation) and is recorded as a realized gain upon receipt of the payment. If a credit event as specified in the contract with the counterparty occurs, the Fund may either be required to accept the reference
obligation from the buyer in exchange for a cash payment of its notional amount, or to pay the buyer a net cash settlement equal to the notional amount less an agreed-upon value of the reference obligation (recovery
value) as of the date of the credit event. The difference between the value of the obligation or cash received and the notional amount paid will be recorded as a realized gain (loss). The maximum potential amount of
undiscounted future payments the Fund could be required to make as the seller of protection under a credit default swap contract is equal to the notional amount of the reference obligation. These potential amounts may
be partially offset by any recovery values of the respective reference obligations or upfront receipts upon entering into the agreement. The notional amounts and market values of all credit default swap contracts in
which the Fund is the seller of protection, if any, are disclosed in the Credit Default Swap Contracts Outstanding schedule following the Portfolio of Investments.
As a protection seller, the Fund
bears the risk of loss from the credit events specified in the contract with the counterparty. For credit default swap contracts on credit indices, quoted market prices and resulting market values serve as an
indicator of the current status of the payment/performance risk. Increasing market values, in absolute terms when compared to the notional amount of the swap, represent a deterioration of the reference entity’s
credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the contract.
Effects of derivative transactions in
the financial statements
The following tables are intended
to provide additional information about the effect of derivatives on the financial statements of the Fund, including: the fair value of derivatives by risk category and the location of those fair values in the
Statement of Assets and Liabilities; and the impact of derivative transactions over the period in the Statement of Operations, including realized and unrealized gains (losses). The derivative instrument schedules
following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any.
| 22 | Variable Portfolio – Managed Volatility Growth Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
The following table is a summary of
the fair value of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) at June 30, 2020:
| Asset derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Credit risk | Component of trust capital — unrealized appreciation on swap contracts | 1,563,588* |
| Equity risk | Component of trust capital — unrealized appreciation on futures contracts | 24,033,818* |
| Equity risk | Investments, at value — Options Purchased | 206,002,700 |
| Foreign exchange risk | Component of trust capital — unrealized appreciation on futures contracts | 326,196* |
| Interest rate risk | Component of trust capital — unrealized appreciation on futures contracts | 3,242,497* |
| Total | 235,168,799 |
| Liability derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Equity risk | Component of trust capital - unrealized depreciation on futures contracts | 36,128,530* |
| Foreign exchange risk | Component of trust capital - unrealized depreciation on futures contracts | 376,646* |
| Interest rate risk | Component of trust capital - unrealized depreciation on futures contracts | 139,691* |
| Total | 36,644,867 |
| * | Includes cumulative appreciation (depreciation) as reported in the tables following the Portfolio of Investments. Only the current day’s variation margin is reported in receivables or payables in the Statement of Assets and Liabilities. |
The following table indicates the
effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) in the Statement of Operations for the six months ended June 30, 2020:
| Amount of realized gain (loss) on derivatives recognized in income | ||||
| Risk exposure category | Futures contracts ($) | Options contracts purchased ($) | Swap contracts ($) | Total ($) |
| Credit risk | — | — | 246,233 | 246,233 |
| Equity risk | (359,657,819) | 329,156,626 | — | (30,501,193) |
| Foreign exchange risk | (11,009,786) | — | — | (11,009,786) |
| Interest rate risk | 51,693,654 | — | — | 51,693,654 |
| Total | (318,973,951) | 329,156,626 | 246,233 | 10,428,908 |
| Change in unrealized appreciation (depreciation) on derivatives recognized in income | ||||
| Risk exposure category | Futures contracts ($) | Options contracts purchased ($) | Swap contracts ($) | Total ($) |
| Credit risk | — | — | 1,563,588 | 1,563,588 |
| Equity risk | (53,412,303) | 49,019,970 | — | (4,392,333) |
| Foreign exchange risk | (4,505,290) | — | — | (4,505,290) |
| Interest rate risk | 6,766,748 | — | — | 6,766,748 |
| Total | (51,150,845) | 49,019,970 | 1,563,588 | (567,287) |
| Variable Portfolio – Managed Volatility Growth Fund | Semiannual Report 2020 | 23 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
The following table is a summary
of the average outstanding volume by derivative instrument for the six months ended June 30, 2020:
| Derivative instrument | Average notional amounts ($)* |
| Futures contracts — long | 2,877,069,569 |
| Futures contracts — short | 1,041,594,294 |
| Credit default swap contracts — sell protection | 75,000,000 |
| Derivative instrument | Average value ($)* |
| Options contracts — purchased | 197,162,350 |
| * | Based on the ending quarterly outstanding amounts for the six months ended June 30, 2020. |
Asset- and mortgage-backed
securities
The Fund may invest in asset-backed
and mortgage-backed securities. The maturity dates shown represent the original maturity of the underlying obligation. Actual maturity may vary based upon prepayment activity on these obligations. All, or a portion,
of the obligation may be prepaid at any time because the underlying asset may be prepaid. As a result, decreasing market interest rates could result in an increased level of prepayment. An increased prepayment rate
will have the effect of shortening the maturity of the security. Unless otherwise noted, the coupon rates presented are fixed rates.
Delayed delivery securities
The Fund may trade securities on
other than normal settlement terms, including securities purchased or sold on a “when-issued” or "forward commitment" basis. This may increase risk to the Fund since the other party to the transaction may
fail to deliver, which could cause the Fund to subsequently invest at less advantageous prices. The Fund designates cash or liquid securities in an amount equal to the delayed delivery commitment.
To be announced securities
The Fund may trade securities on a
To Be Announced (TBA) basis. As with other delayed-delivery transactions, a seller agrees to issue a TBA security at a future date. However, the seller does not specify the particular securities to be delivered.
Instead, the Fund agrees to accept any security that meets specified terms.
In some cases, Master Securities
Forward Transaction Agreements (MSFTAs) may be used to govern transactions of certain forward-settling agency mortgage-backed securities, such as delayed-delivery and TBAs, between the Fund and counterparty. The MSFTA
maintains provisions for, among other things, initiation and confirmation, payment and transfer, events of default, termination, and maintenance of collateral relating to such transactions.
Mortgage dollar roll transactions
The Fund may enter into mortgage
“dollar rolls” in which the Fund sells securities for delivery in the current month and simultaneously contracts with the same counterparty to repurchase similar but not identical securities (same type,
coupon and maturity) on a specified future date. During the roll period, the Fund loses the right to receive principal and interest paid on the securities sold. However, the Fund will benefit because it receives
negotiated amounts in the form of reductions of the purchase price for the future purchase plus the interest earned on the cash proceeds of the securities sold until the settlement date of the forward purchase. The
Fund records the incremental difference between the forward purchase and sale of each forward roll as a realized gain or loss. Unless any realized gains exceed the income, capital appreciation, and gain or loss due to
mortgage prepayments that would have been realized on the securities sold as part of the mortgage dollar roll, the use of this technique will diminish the investment performance of the Fund compared to what the
performance would have been without the use of mortgage dollar rolls. All cash proceeds will be invested in instruments that are permissible investments for the Fund. The Fund identifies cash or liquid securities in
an amount equal to the forward purchase price.
| 24 | Variable Portfolio – Managed Volatility Growth Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
For financial reporting and tax
purposes, the Fund treats “to be announced” mortgage dollar rolls as two separate transactions, one involving the purchase of a security and a separate transaction involving a sale. These transactions may
increase the Fund’s portfolio turnover rate. The Fund does not currently enter into mortgage dollar rolls that are accounted for as financing transactions.
Mortgage dollar rolls involve the
risk that the market value of the securities the Fund is obligated to repurchase may decline below the repurchase price, or that the counterparty may default on its obligations.
Offsetting of assets and
liabilities
The following table presents the
Fund’s gross and net amount of assets and liabilities available for offset under netting arrangements as well as any related collateral received or pledged by the Fund as of June 30, 2020:
| JPMorgan ($) | Morgan Stanley ($) | Total ($) | |
| Assets | |||
| Centrally cleared credit default swap contracts (a) | - | 208,660 | 208,660 |
| Options purchased puts | 206,002,700 | - | 206,002,700 |
| Total assets | 206,002,700 | 208,660 | 206,211,360 |
| Total financial and derivative net assets | 206,002,700 | 208,660 | 206,211,360 |
| Total collateral received (pledged) (b) | - | - | - |
| Net amount (c) | 206,002,700 | 208,660 | 206,211,360 |
| (a) | Centrally cleared swaps are included within payable/receivable for variation margin on the Statement of Assets and Liabilities. |
| (b) | In some instances, the actual collateral received and/or pledged may be more than the amount shown due to overcollateralization. |
| (c) | Represents the net amount due from/(to) counterparties in the event of default. |
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Interest income is recorded on an
accrual basis. Market premiums and discounts, including original issue discounts, are amortized and accreted, respectively, over the expected life of the security on all debt securities, unless otherwise noted. The
Fund classifies gains and losses realized on prepayments received on mortgage-backed securities as adjustments to interest income.
The Fund may place a debt security
on non-accrual status and reduce related interest income when it becomes probable that the interest will not be collected and the amount of uncollectible interest can be reasonably estimated. A defaulted debt security
is removed from non-accrual status when the issuer resumes interest payments or when collectibility of interest is reasonably assured.
Corporate actions and dividend
income are recorded on the ex-dividend date.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a
proportionate change in return of capital to shareholders.
| Variable Portfolio – Managed Volatility Growth Fund | Semiannual Report 2020 | 25 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
Income and capital gain
distributions from the Underlying Funds, if any, are recorded on the ex-dividend date.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund is treated as a
partnership for federal income tax purposes, and the Fund does not expect to make regular distributions. The Fund will not be subject to federal income tax, and therefore, there is no provision for federal income
taxes. The partners of the Fund are subject to tax on their distributive share of the Fund’s income and loss. The components of the Fund’s net assets are reported at the partner-level for federal income
tax purposes, and therefore, are not presented in the Statement of Assets and Liabilities.
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees and
underlying fund fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager). Under the Management Agreement, the Investment Manager provides the Fund with investment research and advice, as well as
administrative and accounting services. The management services fee is an annual fee that is a blend of (i) 0.02% on assets invested in affiliated underlying funds (including exchange-traded funds and closed-end
funds) that pay a management services fee (or investment advisory services fee, as applicable) to the Investment Manager and (ii) a fee that declines from 0.72% to 0.52%, depending on asset levels, on assets
invested in securities (other than affiliated underlying funds (including exchange-traded funds and closed-end funds) that pay a management services fee (or investment advisory services fee, as applicable) to the
Investment Manager) including other funds advised by the Investment Manager that do not pay a management services fee to the Investment Manager, third party funds, derivatives and individual securities. The annualized
effective management services fee rate for the six months ended June 30, 2020 was 0.18% of the Fund’s average daily net assets.
| 26 | Variable Portfolio – Managed Volatility Growth Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
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 expense and fee
levels and the Fund may own different proportions of Underlying Funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. These expenses are not reflected in the expenses
shown in Statement of Operations and are not included in the ratios to average net assets shown in the Financial Highlights.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. These members of the Board of Trustees
may participate in a Deferred Compensation Plan (the Deferred Plan) which may be terminated at any time. Obligations of the Deferred Plan will be paid solely out of the Fund’s assets, and all amounts payable
under the Deferred Plan constitute a general unsecured obligation of the Fund.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The annualized
effective service fee rate for the six months ended June 30, 2020, was 0.06% of the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. The Board of Trustees has approved, and the Fund has adopted, a distribution plan
(the Plan) which sets the distribution fees for the Fund. These fees are calculated daily and are intended to compensate the Distributor for selling shares of the Fund. The Fund pays a monthly distribution fee to the
Distributor at the maximum annual rate of 0.25% of the average daily net assets attributable to Class 2 shares of the Fund. The Fund pays no distribution and service fees for Class 1 shares.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, including indirect expenses of the Underlying Funds, after giving effect to fees waived/expenses reimbursed and any balance credits
and/or overdraft charges from the Fund’s custodian, do not exceed the following annual rate(s) as a percentage of the class’ average daily net assets:
| May 1, 2020 through April 30, 2021 | Prior to May 1, 2020 | |
| Class 1 | 0.80% | 0.85% |
| Class 2 | 1.05 | 1.10 |
| Variable Portfolio – Managed Volatility Growth Fund | Semiannual Report 2020 | 27 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), transaction costs and brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program
fees and expenses, transaction charges and interest on borrowed money, interest, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This
agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements
described above are not recoverable by the Investment Manager or its affiliates in future periods.
Note 4. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $10,437,991,308 and $8,999,880,449, respectively, for the six months ended June 30, 2020, of which
$8,989,245,749 and $7,430,585,751, respectively, were U.S. government securities. The amount of purchase and sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 5. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes referred to
as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 6. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund did not borrow or lend
money under the Interfund Program during the six months ended June 30, 2020.
Note 7. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by Citibank, N.A., HSBC Bank USA, N.A. and JPMorgan Chase Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. The credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment Manager or an affiliated investment manager, severally and
not jointly, permits collective borrowings up to $1 billion. Interest is charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the
one-month LIBOR rate and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a
commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The commitment fee is included in other expenses in the Statement of Operations. This agreement
expires annually in December unless extended or renewed.
The Fund had no borrowings during
the six months ended June 30, 2020.
| 28 | Variable Portfolio – Managed Volatility Growth Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Note 8. Significant
risks
Market and environment risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The Fund performance may also be
significantly negatively impacted by the economic impact of the coronavirus disease 2019 (COVID-19) pandemic. Public health crisis has become a pandemic that has resulted in, and may continue to result in, significant
global economic and societal disruption and market volatility due to disruptions in market access, resource availability, facilities operations, imposition of tariffs, export controls and supply chain disruption,
among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement and loss in human and other resources. The uncertainty surrounding the magnitude, duration,
reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as
the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and pandemics that may arise in the future – could negatively affect global economies and markets
in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in emerging market countries may be greater due to generally less established healthcare systems,
governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The disruptions caused
by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively impact the Fund’s ability to achieve their investment objectives. Any such event(s) could
have a significant adverse impact on the value and risk profile of the Fund.
The Investment Manager and its
affiliates have systematically implemented strategies to address the operating environment spurred by the COVID-19 pandemic. To promote the safety and security of our employees and to assure the continuity of our
business operations, we have implemented a work from home protocol for virtually all of our employee population, restricted business travel, and provided resources for complying with the guidance from the World Health
Organization, the U.S. Centers for Disease Control and governments. Our operations teams seek to operate without significant disruptions in service. Our pandemic strategy takes into consideration that a pandemic could
be widespread and may occur in multiple waves, affecting different communities at different times with varying levels of severity. We cannot, however, predict the impact that natural or man-made disasters, including
the COVID-19 pandemic, may have on the ability of our employees and third-party service providers to continue ordinary business operations and technology functions over near- or longer-term periods.
Shareholder concentration risk
At June 30, 2020, affiliated
shareholders of record owned 100.0% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
| Variable Portfolio – Managed Volatility Growth Fund | Semiannual Report 2020 | 29 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Note 9. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 10. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial.
| 30 | Variable Portfolio – Managed Volatility Growth Fund | Semiannual Report 2020 |
Liquidity Risk
Management Program
Pursuant to Rule 22e-4 under the
1940 Act, the Fund has adopted a liquidity risk management program (Program). The Program’s principal objectives include assessing, managing and periodically reviewing the Fund’s liquidity risk. Liquidity
risk is defined as the risk that the Fund could not meet redemption requests without significant dilution of remaining investors’ interests in the Fund.
The Board has appointed the
Investment Manager as the program administrator for the Fund’s Program. The Investment Manager has delegated oversight of the Program to its Liquidity Risk Management Committee (the Committee). At a board
meeting during the fiscal period, the Committee provided the Board with a report addressing the operations of the program and assessing its adequacy and effectiveness of implementation for the period December 1, 2018,
through December 31, 2019, including:
| • | the Fund had sufficient liquidity to both meet redemptions and operate effectively on behalf of shareholders; |
| • | there were no material changes to the Program during the period; |
| • | the implementation of the Program was effective to manage the Fund’s liquidity risk; and |
| • | the Program operated adequately during the period. |
There can be no assurance that the
Program will achieve its objectives in the future. Please refer to the Fund’s prospectus for more information regarding the Fund’s exposure to liquidity risk and other principal risks to which an
investment in the Fund may be subject.
Board Consideration
and Approval of Management
Agreement
On June 17, 2020, the Board of
Trustees (the Board) and the Trustees who are not interested persons (as defined in the Investment Company Act of 1940) (the Independent Trustees) of Columbia Funds Variable Insurance Trust (the Trust) unanimously
approved the continuation of the Management Agreement (the Management Agreement) with Columbia Management Investment Advisers, LLC (the Investment Manager) with respect to Variable Portfolio – Managed Volatility
Growth Fund (the Fund), a series of the Trust. As detailed below, the Board’s Advisory Fees and Expenses Committee (the Committee) and the Board met on multiple occasions to review and discuss, among themselves,
with the management team of the Investment Manager and with an independent fee consultant, materials provided by the Investment Manager, the independent fee consultant and others before determining to approve the
continuation of the Management Agreement.
In connection with their
deliberations regarding the continuation of the Management Agreement, the Committee and the Board evaluated materials requested from the Investment Manager regarding the Fund and the Management Agreement, and
discussed these materials with representatives of the Investment Manager at Committee meetings held on March 10, 2020, April 30, 2020 and June 17, 2020 and at Board meetings held on March 11, 2020 and June 17, 2020.
In addition, the Board and its various committees consider matters bearing on the Management Agreement at other meetings throughout the year and in prior years and meet regularly with senior management of the Trust
and the Investment Manager. Through the Board’s Investment Oversight Committees, Trustees also meet with selected portfolio managers of the funds the Trustees oversee and with other investment personnel at
various times throughout the year. The Committee and the Board also consulted with the independent fee consultant, Fund counsel and the Independent Trustees’ independent legal counsel, who advised on various
matters with respect to the Committee’s and the Board’s considerations and otherwise assisted the Committee and the Board in their deliberations. On June 17, 2020, the Committee recommended that the Board
approve the continuation of the Management Agreement. On June 17, 2020, the Board, including the Independent Trustees, voting separately, unanimously approved the continuation of the Management Agreement for the
Fund.
| Variable Portfolio – Managed Volatility Growth Fund | Semiannual Report 2020 | 31 |
Board Consideration and Approval of
Management
Agreement (continued)
The Committee and the Board considered all
information that they, their legal counsel or the Investment Manager believed reasonably necessary to evaluate and to determine whether to recommend for approval or approve the continuation of the Management
Agreement. The information and factors considered by the Committee and the Board in recommending for approval or approving the continuation of the Management Agreement for the Fund included the following:
| • | Information on the investment performance of the Fund relative to the performance of a group of mutual funds determined to be comparable to the Fund by the Investment Manager, as well as performance relative to benchmarks; |
| • | Information on the Fund’s management fees and total expenses, including information comparing the Fund’s expenses to those of a group of comparable mutual funds, as determined by the Investment Manager; |
| • | The Investment Manager’s agreement to contractually limit or cap total operating expenses for the Fund through April 30, 2021 so that total operating expenses (excluding certain fees and expenses, such as transaction costs and certain other investment related expenses, interest, taxes, and infrequent and/or unusual expenses) would not exceed a specified annual rate, as a percentage of the Fund’s net assets; |
| • | The terms and conditions of the Management Agreement; |
| • | The current and proposed terms and conditions of other agreements and arrangements with affiliates of the Investment Manager relating to the operations of the Fund, including agreements with respect to the provision of distribution, transfer agency and shareholder services to the Fund; |
| • | Descriptions of various functions performed by the Investment Manager under the Management Agreement, including portfolio management and portfolio trading practices; |
| • | Information regarding any recently negotiated management fees of similarly-managed portfolios of other institutional clients of the Investment Manager; |
| • | Information regarding the reputation, regulatory history and resources of the Investment Manager, including information regarding senior management, portfolio managers and other personnel; |
| • | Information regarding the capabilities of the Investment Manager with respect to compliance monitoring services, including an assessment of the Investment Manager’s compliance system by the Fund’s Chief Compliance Officer; and |
| • | The profitability to the Investment Manager and its affiliates from their relationships with the Fund. |
Nature, extent and quality of
services provided under the Management Agreement
The Committee and the Board
considered the nature, extent and quality of services provided to the Fund by the Investment Manager and its affiliates under the Management Agreement and under separate agreements for the provision of transfer agency
and shareholder services, and the resources dedicated to the Fund and the other Columbia Funds by the Investment Manager and its affiliates. The Committee and the Board considered, among other things, the Investment
Manager’s ability to attract, motivate and retain highly qualified research, advisory and supervisory investment professionals (including compensation programs for personnel involved in fund management,
reputation and other attributes), the portfolio management services provided by those investment professionals, and the quality of the Investment Manager’s investment research capabilities and trade execution
services. The Committee and the Board also considered the potential benefits to shareholders of investing in a mutual fund that is part of a fund complex offering exposure to a variety of asset classes and investment
disciplines and providing a variety of fund and shareholder services.
The Committee and the Board also
considered the professional experience and qualifications of the senior personnel of the Investment Manager, which included consideration of the Investment Manager’s experience with funds using an investment
strategy similar to that used by the Investment Manager for the Fund. The Committee and the Board noted the compliance programs of and the compliance-related resources provided to the Fund by the Investment Manager
and its affiliates and the resources dedicated by the Investment Manager and its affiliates to risk management, and considered the Investment Manager’s ability to provide administrative services to the Fund and
coordinate the activities of the Fund’s other service
| 32 | Variable Portfolio – Managed Volatility Growth Fund | Semiannual Report 2020 |
Board Consideration and Approval of
Management
Agreement (continued)
providers. After reviewing these and related
factors, the Committee and the Board concluded, within the context of their overall conclusions, that the nature, extent and quality of the services provided to the Fund under the Management Agreement supported the
continuation of the Management Agreement.
Investment performance
The Committee and the Board
reviewed information about the performance of the Fund over various time periods, including performance information relative to benchmarks, information that compared the performance of the Fund to the performance of a
group of comparable mutual funds as determined by the Investment Manager, and information and analysis provided by the independent fee consultant. The Committee and the Board also reviewed a description of the
Investment Manager’s methodology for identifying the Fund’s peer groups for purposes of performance and expense comparisons. Although the Fund’s performance lagged that of a relevant peer group for
certain (although not necessarily all) periods, the Committee and the Board concluded that other factors relevant to performance were sufficient, in light of other considerations, to support continuation of the
Management Agreement. Those factors included one or more of the following: (i) that the Fund’s performance, although lagging in certain recent periods, was stronger over the longer term; (ii) that the
underperformance was attributable, to a significant extent, to investment decisions that were reasonable and consistent with the Fund’s investment strategy and policies and that the Fund was performing within a
reasonable range of expectations, given those investment decisions, market conditions and the Fund’s investment strategy; (iii) that the Fund’s performance was competitive when compared to other relevant
performance benchmarks or peer groups; and (iv) that the Investment Manager had taken or was taking steps designed to help improve the Fund’s investment performance, including, but not limited to, replacing
portfolio managers, enhancing the resources supporting the portfolio managers, or modifying investment strategies.
The Committee and the Board noted
that, through December 31, 2019, the Fund’s performance was in the seventy-fifth, fifty-eighth and eighty-sixth percentile (where the best performance would be in the first percentile) of its category selected
by the Investment Manager for the purposes of performance comparisons for the one-, three- and five-year periods, respectively.
The Committee and the Board also
considered the Investment Manager’s performance and reputation generally, the Investment Manager’s historical responsiveness to Board concerns about performance, and the Investment Manager’s
willingness to take steps intended to improve performance. After reviewing these and related factors, the Committee and the Board concluded, within the context of their overall conclusions, that the performance of the
Fund and the Investment Manager was sufficient, in light of other considerations, to support the continuation of the Management Agreement.
Investment management fee rates
and other expenses
The Committee and the Board
considered the management fees charged to the Fund under the Management Agreement as well as the total expenses incurred by the Fund. In assessing the reasonableness of the fees under the Management Agreement, the
Committee and the Board considered, among other information, the Fund’s total expense ratio as a percentage of average daily net assets. The Committee and the Board considered data provided by the Investment
Manager and the independent fee consultant. The Committee and the Board noted that, as of December 31, 2019, the Fund’s actual management fee and net total expense ratio were ranked in the second and third
quintiles, respectively, (where the lowest fees and expenses would be in the first quintile) against the Fund’s expense universe as determined by the Investment Manager for purposes of expense comparison. The
Committee and the Board also took into account the fee waiver and expense limitation arrangements agreed to by the Investment Manager, as noted above.
The Committee and the Board also
received and considered information about the management fees charged by the Investment Manager to institutional accounts. In considering the fees charged to those accounts, the Committee and the Board took into
account, among other things, the Investment Manager’s representations about the differences between managing mutual funds as compared to other types of accounts, including differences in the services provided,
differences in the risk profile of such business for the Investment Manager and the additional resources required to manage mutual funds effectively. The Committee and the Board also received and considered
information about the fees charged by the Investment Manager for sub-advisory services it provides to comparable unaffiliated funds. In evaluating the Fund’s management fees, the Committee and the Board also
took into account the demands, complexity and quality of the investment management of the Fund.
| Variable Portfolio – Managed Volatility Growth Fund | Semiannual Report 2020 | 33 |
Board Consideration and Approval of
Management
Agreement (continued)
After reviewing these and related factors, the
Committee and the Board concluded, within the context of their overall conclusions, that the management fee rates and expenses of the Fund, in light of other considerations, supported the continuation of the
Management Agreement.
Costs of services provided and
profitability
The Committee and the Board also
took note of the costs the Investment Manager and its affiliates incur in connection with the services provided and the profitability to the Investment Manager and its affiliates from their relationships with the
Fund, and the efforts undertaken by the Investment Manager and its affiliates to manage efficiently their costs to provide such services.
The Committee and the Board also
considered the compensation directly or indirectly received by the Investment Manager’s affiliates in connection with their relationships with the Fund. The Committee and the Board reviewed information provided
by management as to the profitability to the Investment Manager and its affiliates of their relationships with the Fund, information about the allocation of expenses used to calculate profitability, and comparisons of
profitability levels realized in 2019 to profitability levels realized in 2018. When reviewing profitability, the Committee and the Board also considered court cases in which adviser profitability was an issue in
whole or in part, the performance of similarly managed funds, the performance of the Fund, and the expense ratio of the Fund. In addition, the Committee and the Board considered information provided by the Investment
Manager regarding the Investment Manager’s financial condition and comparing its profitability to that of other asset management firms that are, or are subsidiaries of, publicly traded companies. In this regard,
the Committee and the Board also considered data provided by the independent fee consultant.
After reviewing these and related
factors, the Committee and the Board concluded, within the context of their overall conclusions, that the costs of services provided and the profitability to the Investment Manager and its affiliates from their
relationships with the Fund supported the continuation of the Management Agreement.
Economies of scale
The Committee and the Board
considered the potential existence of economies of scale in the provision by the Investment Manager of services to the Fund, to groups of related funds, and to the Investment Manager’s investment advisory
clients as a whole, and whether those economies of scale were shared with the Fund through breakpoints in investment management fees or other means, such as expense limitation arrangements and additional investments
by the Investment Manager in investment, trading, compliance and other resources. The Committee and the Board noted that the management fee schedules for the Fund contained breakpoints that would reduce the fee rate
on assets above specified threshold levels.
In considering these matters, the
Committee and the Board also considered the costs of the services provided and the profitability to the Investment Manager and its affiliates from their relationships with the Fund, as noted above. After reviewing
these and related factors, the Committee and the Board concluded, within the context of their overall conclusions, that the extent to which any economies of scale were expected to be shared with the Fund supported the
continuation of the Management Agreement.
Other benefits to the Investment
Manager
The Committee and the Board
received and considered information regarding “fall-out” or ancillary benefits received by the Investment Manager and its affiliates as a result of their relationships with the Fund, such as the engagement
of the Investment Manager’s affiliates to provide distribution, transfer agency and shareholder services to the Fund. In this regard, among other matters, the Committee and the Board considered that the
Fund’s distributor retains a portion of the distribution fees from the Fund. The Committee and the Board also considered the benefits of research made available to the Investment Manager by reason of brokerage
commissions generated by the Fund’s securities transactions, and reviewed information about the Investment Manager’s practices with respect to considering brokerage and research services when allocating
portfolio transactions. In this connection, the Board also noted that the amount of research made available to the Investment Manager by reason of brokerage commissions had been declining over time, and may decline
further. The Committee and the Board also considered the tax benefits provided to affiliates of the Investment Manager as a result of the election by certain Funds to be taxed as partnerships. The Committee and the
Board recognized that the Investment Manager’s profitability would be somewhat lower without these benefits.
| 34 | Variable Portfolio – Managed Volatility Growth Fund | Semiannual Report 2020 |
Board Consideration and Approval of
Management
Agreement (continued)
Conclusion
The Committee and the Board
reviewed all of the above considerations in reaching their decisions to recommend or approve the continuation of the Management Agreement. In their deliberations, the Trustees did not identify any particular
information that was all-important or controlling, and individual Trustees may have attributed different weights to the various factors. Based on their evaluation of all factors that they deemed to be material,
including those factors described above, and assisted by the advice of independent legal counsel, the Board, including the Independent Trustees, voting separately, unanimously approved the continuation of the
Management Agreement.
Results of Meeting of
Shareholders
At a Joint Special Meeting of
Shareholders held on April 16, 2020, shareholders of Columbia Funds Variable Insurance Trust elected each of the ten nominees for the trustees to the Board of Trustees of Columbia Funds Variable Insurance Trust, each
to hold office until he or she dies, resigns or is removed or, if sooner, until the next meeting of shareholders called for the purpose of electing trustees and until the election and qualification of his or her
successor, as follows:
| Trustee | Votes For | Votes Withheld | Abstentions |
| Janet L. Carrig | 26,231,108,809 | 1,129,334,152 | 0 |
| J. Kevin Connaughton | 26,249,644,638 | 1,110,798,323 | 0 |
| Olive Darragh | 26,323,990,658 | 1,036,452,304 | 0 |
| Douglas A. Hacker | 26,255,762,920 | 1,104,680,042 | 0 |
| Nancy T. Lukitsh | 26,332,381,722 | 1,028,061,240 | 0 |
| David M. Moffett | 26,252,719,395 | 1,107,723,567 | 0 |
| John J. Neuhauser | 26,222,694,456 | 1,137,748,505 | 0 |
| Christopher O. Petersen | 26,265,703,212 | 1,094,739,749 | 0 |
| Patrick J. Simpson | 26,222,908,024 | 1,137,534,938 | 0 |
| Natalie A. Trunow | 26,340,164,732 | 1,020,278,229 | 0 |
| Variable Portfolio – Managed Volatility Growth Fund | Semiannual Report 2020 | 35 |
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 225 Franklin Street, Boston, MA
02110-2804
© 2020 Columbia Management Investment
Advisers, LLC.
S-6599 AP (8/20)
Variable Portfolio
– Managed Volatility Conservative Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
| 3 | |
| 5 | |
| 6 | |
| 12 | |
| 13 | |
| 14 | |
| 16 | |
| 18 | |
| 30 | |
| 30 | |
| 34 |
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which Variable Portfolio – Managed Volatility Conservative Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov.
Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge
by visiting columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT, and for reporting periods ended prior to March 31, 2019, on Form N-Q. The Fund’s Form N-Q and Form N-PORT
filings are available on the SEC’s website at sec.gov. The Fund’s complete schedule of portfolio holdings, as filed on Form N-Q or Form N-PORT, can also be obtained without charge, upon request, by calling
800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
225 Franklin Street
Boston, MA 02110
Fund distributor
Columbia Management Investment Distributors,
Inc.
225 Franklin Street
Boston, MA 02110
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Variable Portfolio – Managed Volatility
Conservative Fund | Semiannual Report 2020
Fund at a Glance
(Unaudited)
(Unaudited)
Investment objective
The Fund
pursues total return while seeking to manage the Fund’s exposure to equity market volatility.
Portfolio management
Brian Virginia
Lead Portfolio Manager
Managed Fund since 2014
Anwiti Bahuguna, Ph.D.
Portfolio Manager
Managed Fund since 2015
David Weiss, CFA
Portfolio Manager
Managed Fund since 2016
Joshua Kutin, CFA
Portfolio Manager
Managed Fund since 2018
| Variable Portfolio – Managed Volatility Conservative Fund | Semiannual Report 2020 | 3 |
Fund at a Glance (continued)
(Unaudited)
(Unaudited)
| Portfolio Allocation (%) (at June 30, 2020) | |
| Allocations to Underlying Funds | |
| Equity Funds | 15.7 |
| International | 4.0 |
| U.S. Large Cap | 9.2 |
| U.S. Mid Cap | 1.0 |
| U.S. Small Cap | 1.5 |
| Exchange-Traded Equity Funds | 4.0 |
| International Mid Large Cap | 1.2 |
| U.S. Large Cap | 2.8 |
| Exchange-Traded Fixed Income Funds | 3.6 |
| Investment Grade | 3.6 |
| Fixed Income Funds | 50.3 |
| Investment Grade | 50.3 |
| Allocations to Tactical Assets | |
| Money Market Fund Shares Held to Cover Open Derivatives Instruments(a) | 16.6 |
| Options Purchased Puts | 0.7 |
| Residential Mortgage-Backed Securities - Agency | 9.1 |
| Total | 100.0 |
| (a) | Includes investments in Money Market Funds (amounting to $137.8 million) which have been segregated to cover obligations relating to the Fund’s investment in derivatives as part of its tactical allocation strategy. For a description of the Fund’s investments in derivatives, see Investments in derivatives following the Portfolio of Investments and Note 2 to the Notes to Financial Statements. |
Percentages indicated are based upon
total investments including options purchased and excluding all other investments in derivatives, if any. The Fund’s portfolio composition is subject to change.
| 4 | Variable Portfolio – Managed Volatility Conservative Fund | Semiannual Report 2020 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount 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 results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
In addition to the ongoing expenses
which the Fund bears directly, the Fund’s shareholders indirectly bear the Fund’s allocable share of the costs and expenses of each underlying fund in which the Fund invests. You can also estimate the
effective expenses paid during the period, which includes the indirect fees associated with investing in the underlying funds, by using the amounts listed in the "Effective expenses paid during the period" column.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
| January 1, 2020 — June 30, 2020 | ||||||||||
| Account value at the beginning of the period ($) | Account value at the end of the period ($) | Expenses paid during the period ($) | Fund’s annualized expense ratio (%) | Effective expenses paid during the period ($) | Fund’s effective annualized expense ratio (%) | |||||
| Actual | Hypothetical | Actual | Hypothetical | Actual | Hypothetical | Actual | Actual | Hypothetical | Actual | |
| Class 1 | 1,000.00 | 1,000.00 | 1,024.40 | 1,023.37 | 1.51 | 1.51 | 0.30 | 3.52 | 3.52 | 0.70 |
| Class 2 | 1,000.00 | 1,000.00 | 1,022.90 | 1,022.13 | 2.77 | 2.77 | 0.55 | 4.78 | 4.78 | 0.95 |
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 366.
Effective expenses paid during the
period and the Fund’s effective annualized expense ratio include expenses borne directly to the class plus the Fund’s pro rata portion of the ongoing expenses charged by the underlying funds using the
expense ratio of each class of the underlying funds as of the underlying fund’s most recent shareholder report.
| Variable Portfolio – Managed Volatility Conservative Fund | Semiannual Report 2020 | 5 |
Portfolio of Investments
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 6 | Variable Portfolio – Managed Volatility Conservative Fund | Semiannual Report 2020 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
At June 30, 2020,
securities and/or cash totaling $6,339,410 were pledged as collateral.
Investments in
derivatives
| Long futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| British Pound | 3 | 09/2020 | USD | 232,444 | — | (6,332) |
| Japanese Yen | 1 | 09/2020 | USD | 115,888 | 310 | — |
| MSCI Singapore Index | 6 | 07/2020 | SGD | 177,510 | — | (2,047) |
| S&P 500 Index E-mini | 132 | 09/2020 | USD | 20,395,320 | 593,525 | — |
| U.S. Long Bond | 82 | 09/2020 | USD | 14,642,125 | 27,251 | — |
| U.S. Treasury 10-Year Note | 182 | 09/2020 | USD | 25,329,281 | 66,464 | — |
| U.S. Treasury 2-Year Note | 74 | 09/2020 | USD | 16,341,281 | 1,778 | — |
| U.S. Treasury 5-Year Note | 277 | 09/2020 | USD | 34,830,586 | 75,176 | — |
| Total | 764,504 | (8,379) | ||||
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Variable Portfolio – Managed Volatility Conservative Fund | Semiannual Report 2020 | 7 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
| Short futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| Australian Dollar | (19) | 09/2020 | USD | (1,311,000) | 23,110 | — |
| Canadian Dollar | (2) | 09/2020 | USD | (147,240) | 2,417 | — |
| Euro FX | (1) | 09/2020 | USD | (140,669) | — | (262) |
| EURO STOXX 50 Index | (80) | 09/2020 | EUR | (2,578,400) | — | (98,189) |
| FTSE 100 Index | (19) | 09/2020 | GBP | (1,168,025) | — | (17,623) |
| Hang Seng Index | (8) | 07/2020 | HKD | (9,698,800) | 4,135 | — |
| OMXS30 Index | (161) | 07/2020 | SEK | (26,826,625) | — | (122,593) |
| Russell 2000 Index E-mini | (118) | 09/2020 | USD | (8,481,840) | — | (495,303) |
| S&P 500 Index E-mini | (150) | 09/2020 | USD | (23,176,500) | — | (521,647) |
| S&P/TSX 60 Index | (10) | 09/2020 | CAD | (1,857,000) | — | (41,658) |
| SPI 200 Index | (1) | 09/2020 | AUD | (147,300) | — | (2,638) |
| Swiss Franc | (3) | 09/2020 | USD | (396,750) | — | (3,667) |
| TOPIX Index | (3) | 09/2020 | JPY | (46,755,000) | 11,437 | — |
| TOPIX Index | (8) | 09/2020 | JPY | (124,680,000) | — | (17,292) |
| U.S. Ultra Treasury Bond | (12) | 09/2020 | USD | (2,617,875) | 17,413 | — |
| Total | 58,512 | (1,320,872) | ||||
| Put option contracts purchased | ||||||||
| Description | Counterparty | Trading currency | Notional amount | Number of contracts | Exercise price/Rate | Expiration date | Cost ($) | Value ($) |
| S&P 500 Index | JPMorgan | USD | 53,014,959 | 171 | 2,500.00 | 12/17/2021 | 2,884,495 | 3,137,850 |
| S&P 500 Index | JPMorgan | USD | 32,553,045 | 105 | 2,600.00 | 12/17/2021 | 1,808,629 | 2,369,850 |
| S&P 500 Index | JPMorgan | USD | 9,920,928 | 32 | 2,400.00 | 12/17/2021 | 587,863 | 510,080 |
| Total | 5,280,987 | 6,017,780 | ||||||
Notes to Portfolio of
Investments
| (a) | As defined in the Investment Company Act of 1940, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the period ended June 30, 2020 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Capital gain distributions($) | Realized gain (loss)($) | Dividends — affiliated issuers ($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.253% | |||||||||
| 115,040,778 | 89,342,257 | (66,611,655) | 19,070 | 137,790,450 | — | 1,766 | 578,859 | 137,790,450 | |
| Columbia Variable Portfolio – Contrarian Core Fund, Class 1 Shares | |||||||||
| 4,938,391 | 2,239,108 | (643,276) | 331,622 | 6,865,845 | — | (4,374) | — | 260,366 | |
| Columbia Variable Portfolio – Disciplined Core Fund, Class 1 Shares | |||||||||
| 14,340,260 | 6,992,514 | (1,977,917) | 985,850 | 20,340,707 | — | (62,672) | — | 357,482 | |
| Columbia Variable Portfolio – Dividend Opportunity Fund, Class 1 Shares | |||||||||
| 3,275,984 | 1,651,555 | (331,043) | (225,263) | 4,371,233 | — | (35,402) | — | 169,955 | |
| Columbia Variable Portfolio – Intermediate Bond Fund, Class 1 Shares | |||||||||
| 62,429,451 | 16,646,938 | (692,402) | 5,171,091 | 83,555,078 | — | 7,494 | — | 7,355,201 | |
| Columbia Variable Portfolio – Large Cap Growth Fund, Class 1 Shares | |||||||||
| 4,530,074 | 1,825,222 | (656,751) | 864,324 | 6,562,869 | — | 38,146 | — | 271,417 | |
| Columbia Variable Portfolio – Limited Duration Credit Fund, Class 1 Shares | |||||||||
| 18,985,434 | 5,439,927 | (125,580) | 841,030 | 25,140,811 | — | 746 | — | 2,496,605 | |
| Columbia Variable Portfolio – Long Government/Credit Bond Fund, Class 1 Shares | |||||||||
| 31,626,919 | 7,069,748 | (1,275,331) | 4,968,107 | 42,389,443 | — | 32,761 | — | 3,385,738 | |
| Columbia Variable Portfolio – Mid Cap Growth Fund, Class 1 Shares | |||||||||
| 1,229,333 | 573,028 | (176,422) | 185,886 | 1,811,825 | — | (1) | — | 52,274 | |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 8 | Variable Portfolio – Managed Volatility Conservative Fund | Semiannual Report 2020 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Notes
to Portfolio of Investments (continued)
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Capital gain distributions($) | Realized gain (loss)($) | Dividends — affiliated issuers ($) | End of period shares |
| Columbia Variable Portfolio – Overseas Core Fund, Class 1 Shares | |||||||||
| — | 7,415,828 | (11,424) | (89,026) | 7,315,378 | 91,482 | (331) | 37,346 | 623,115 | |
| Columbia Variable Portfolio - Select Large Cap Equity Fund, Class 1 Shares | |||||||||
| 2,463,277 | 1,111,194 | (333,518) | 198,012 | 3,438,965 | — | (1,159) | — | 289,719 | |
| Columbia Variable Portfolio – Select Large Cap Value Fund, Class 1 Shares | |||||||||
| 2,474,720 | 1,492,420 | (393,627) | (98,360) | 3,475,153 | — | (45,640) | — | 147,440 | |
| Columbia Variable Portfolio – Select Mid Cap Value Fund, Class 1 Shares | |||||||||
| 1,235,752 | 781,744 | (174,680) | (136,158) | 1,706,658 | — | (28,686) | — | 82,407 | |
| Columbia Variable Portfolio - Small Cap Value Fund, Class 1 Shares | |||||||||
| 1,697,495 | 1,020,526 | (37,927) | (176,070) | 2,504,024 | — | (2,509) | — | 201,612 | |
| Columbia Variable Portfolio - Small Company Growth Fund, Class 1 Shares | |||||||||
| 1,673,240 | 486,067 | (14,075) | 457,057 | 2,602,289 | — | 1,642 | — | 121,432 | |
| Columbia Variable Portfolio – U.S. Equities Fund, Class 1 Shares | |||||||||
| 393,996 | — | (248,491) | (145,505) | — | — | 23,158 | — | — | |
| Columbia Variable Portfolio – U.S. Government Mortgage Fund, Class 1 Shares | |||||||||
| 18,556,859 | 5,367,170 | (131,759) | 658,819 | 24,451,089 | — | 376 | — | 2,232,976 | |
| CTIVP® – American Century Diversified Bond Fund, Class 1 Shares | |||||||||
| 45,560,315 | 12,850,955 | (523,431) | 2,430,759 | 60,318,598 | — | 1,191 | — | 5,249,660 | |
| CTIVP® – Lazard International Equity Advantage Fund, Class 1 Shares | |||||||||
| 8,596,966 | 5,413,380 | (6,710,173) | (220,238) | 7,079,935 | — | (476,942) | 20,185 | 731,398 | |
| CTIVP® – Loomis Sayles Growth Fund, Class 1 Shares | |||||||||
| 3,697,845 | 1,335,047 | (409,190) | 634,224 | 5,257,926 | — | 21,418 | — | 127,465 | |
| CTIVP® – Los Angeles Capital Large Cap Growth Fund, Class 1 Shares | |||||||||
| 3,693,928 | 1,589,196 | (549,653) | 712,482 | 5,445,953 | — | 16,812 | — | 143,201 | |
| CTIVP® – MFS® Value Fund, Class 1 Shares | |||||||||
| 2,457,868 | 1,322,873 | (315,647) | (138,501) | 3,326,593 | — | (30,497) | — | 131,227 | |
| CTIVP® – Morgan Stanley Advantage Fund, Class 1 Shares | |||||||||
| 3,660,352 | 1,419,839 | (671,421) | 1,656,709 | 6,065,479 | — | 43,174 | — | 128,669 | |
| CTIVP® – T. Rowe Price Large Cap Value Fund, Class 1 Shares | |||||||||
| 2,456,745 | 1,435,655 | (279,895) | (285,714) | 3,326,791 | — | (42,862) | — | 155,749 | |
| CTIVP® – TCW Core Plus Bond Fund, Class 1 Shares | |||||||||
| 62,432,997 | 16,709,842 | (771,196) | 4,350,991 | 82,722,634 | — | 9,945 | — | 7,076,359 | |
| CTIVP® – Victory Sycamore Established Value Fund, Class 1 Shares | |||||||||
| 1,634,911 | 988,048 | (236,149) | (73,133) | 2,313,677 | — | (32,093) | — | 89,539 | |
| CTIVP® – Wells Fargo Short Duration Government Fund, Class 1 Shares | |||||||||
| 7,660,965 | 2,198,281 | (41,094) | 260,830 | 10,078,982 | — | 183 | — | 950,847 | |
| CTIVP® – Westfield Mid Cap Growth Fund, Class 1 Shares | |||||||||
| 1,651,021 | 884,836 | (307,211) | 190,267 | 2,418,913 | — | (6,002) | — | 75,591 | |
| Variable Portfolio - Partners Core Bond Fund, Class 1 Shares | |||||||||
| 66,003,274 | 17,885,023 | (834,193) | 4,457,529 | 87,511,633 | — | 10,363 | — | 7,403,692 | |
| Variable Portfolio - Partners Core Equity Fund, Class 1 Shares | |||||||||
| 5,327,053 | 2,546,514 | (672,307) | 201,777 | 7,403,037 | — | (26,610) | — | 325,122 | |
| Variable Portfolio - Partners International Core Equity Fund, Class 1 Shares | |||||||||
| 8,595,700 | 4,442,025 | (1,701,582) | (225,278) | 11,110,865 | 36,370 | (120,348) | 26,814 | 1,131,453 | |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – Managed Volatility Conservative Fund | Semiannual Report 2020 | 9 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Notes
to Portfolio of Investments (continued)
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Capital gain distributions($) | Realized gain (loss)($) | Dividends — affiliated issuers ($) | End of period shares |
| Variable Portfolio - Partners International Growth Fund, Class 1 Shares | |||||||||
| 2,877,272 | 1,411,015 | (1,028,366) | 109,521 | 3,369,442 | 37,545 | 13,049 | 8,972 | 305,203 | |
| Variable Portfolio - Partners International Value Fund, Class 1 Shares | |||||||||
| 2,850,201 | 1,923,305 | (211,730) | (499,816) | 4,061,960 | — | (49,671) | 29,956 | 540,154 | |
| Variable Portfolio – Partners Small Cap Growth Fund, Class 1 Shares | |||||||||
| 2,458,443 | 1,314,132 | (383,311) | 324,591 | 3,713,855 | — | (20,100) | — | 147,493 | |
| Variable Portfolio – Partners Small Cap Value Fund, Class 1 Shares | |||||||||
| 2,861,661 | 1,927,088 | (359,240) | (410,496) | 4,019,013 | — | (75,974) | — | 179,340 | |
| Total | 519,369,480 | 27,286,990 | 683,867,103 | 165,397 | (839,649) | 702,132 | |||
| (b) | Non-income producing investment. |
| (c) | Represents a security purchased on a when-issued basis. |
| (d) | The rate shown is the seven-day current annualized yield at June 30, 2020. |
Abbreviation Legend
| TBA | To Be Announced |
Currency Legend
| AUD | Australian Dollar |
| CAD | Canada Dollar |
| EUR | Euro |
| GBP | British Pound |
| HKD | Hong Kong Dollar |
| JPY | Japanese Yen |
| SEK | Swedish Krona |
| SGD | Singapore Dollar |
| USD | US Dollar |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 10 | Variable Portfolio – Managed Volatility Conservative Fund | Semiannual Report 2020 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Fair value measurements (continued)
Certain investments that have been measured at fair value using the net asset value (NAV) per share (or its equivalent) are not categorized in the fair value hierarchy. The fair value amounts presented in the table are intended to reconcile the fair value hierarchy to the amounts presented in the Portfolio of Investments. The Variable Portfolios serve as investment vehicles for variable annuity contracts and variable life insurance policies. Principle investment strategies within these Variable Portfolios vary based on the Portfolios investment objective. Investments in the Variable Portfolios may be redeemed on a daily basis without restriction.
Certain investments that have been measured at fair value using the net asset value (NAV) per share (or its equivalent) are not categorized in the fair value hierarchy. The fair value amounts presented in the table are intended to reconcile the fair value hierarchy to the amounts presented in the Portfolio of Investments. The Variable Portfolios serve as investment vehicles for variable annuity contracts and variable life insurance policies. Principle investment strategies within these Variable Portfolios vary based on the Portfolios investment objective. Investments in the Variable Portfolios may be redeemed on a daily basis without restriction.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at June 30, 2020:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Assets at NAV ($) | Total ($) | |
| Investments in Securities | |||||
| Equity Funds | — | — | — | 129,908,385 | 129,908,385 |
| Exchange-Traded Equity Funds | 32,839,006 | — | — | — | 32,839,006 |
| Exchange-Traded Fixed Income Funds | 29,791,750 | — | — | — | 29,791,750 |
| Fixed Income Funds | — | — | — | 416,168,268 | 416,168,268 |
| Residential Mortgage-Backed Securities - Agency | — | 75,497,636 | — | — | 75,497,636 |
| Options Purchased Puts | 6,017,780 | — | — | — | 6,017,780 |
| Money Market Funds | 137,790,450 | — | — | — | 137,790,450 |
| Total Investments in Securities | 206,438,986 | 75,497,636 | — | 546,076,653 | 828,013,275 |
| Investments in Derivatives | |||||
| Asset | |||||
| Futures Contracts | 823,016 | — | — | — | 823,016 |
| Liability | |||||
| Futures Contracts | (1,329,251) | — | — | — | (1,329,251) |
| Total | 205,932,751 | 75,497,636 | — | 546,076,653 | 827,507,040 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The Fund’s assets assigned to
the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical
assets.
Futures contracts are valued at
unrealized appreciation (depreciation).
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – Managed Volatility Conservative Fund | Semiannual Report 2020 | 11 |
Statement of Assets and Liabilities
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $128,443,103) | $138,128,392 |
| Affiliated issuers (cost $618,164,600) | 683,867,103 |
| Options purchased (cost $5,280,987) | 6,017,780 |
| Margin deposits on: | |
| Futures contracts | 6,339,410 |
| Receivable for: | |
| Capital shares sold | 1,364,324 |
| Dividends | 130,610 |
| Interest | 82,736 |
| Variation margin for futures contracts | 323,416 |
| Trustees’ deferred compensation plan | 44,997 |
| Total assets | 836,298,768 |
| Liabilities | |
| Payable for: | |
| Investments purchased | 939,227 |
| Investments purchased on a delayed delivery basis | 75,548,990 |
| Capital shares purchased | 22,571 |
| Variation margin for futures contracts | 516,136 |
| Management services fees | 4,475 |
| Distribution and/or service fees | 5,157 |
| Service fees | 36,847 |
| Compensation of board members | 2,940 |
| Compensation of chief compliance officer | 48 |
| Other expenses | 29,257 |
| Trustees’ deferred compensation plan | 44,997 |
| Total liabilities | 77,150,645 |
| Net assets applicable to outstanding capital stock | $759,148,123 |
| Represented by | |
| Trust capital | $759,148,123 |
| Total - representing net assets applicable to outstanding capital stock | $759,148,123 |
| Class 1 | |
| Net assets | $107,209 |
| Shares outstanding | 8,240 |
| Net asset value per share | $13.01 |
| Class 2 | |
| Net assets | $759,040,914 |
| Shares outstanding | 58,519,710 |
| Net asset value per share | $12.97 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 12 | Variable Portfolio – Managed Volatility Conservative Fund | Semiannual Report 2020 |
Statement of Operations
Six Months Ended June 30, 2020 (Unaudited)
Six Months Ended June 30, 2020 (Unaudited)
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $633,911 |
| Dividends — affiliated issuers | 702,132 |
| Interest | 9,964 |
| Total income | 1,346,007 |
| Expenses: | |
| Management services fees | 723,683 |
| Distribution and/or service fees | |
| Class 2 | 813,617 |
| Service fees | 196,062 |
| Compensation of board members | 10,571 |
| Custodian fees | 13,931 |
| Printing and postage fees | 8,637 |
| Audit fees | 19,642 |
| Legal fees | 7,449 |
| Compensation of chief compliance officer | 103 |
| Other | 7,994 |
| Total expenses | 1,801,689 |
| Net investment loss | (455,682) |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 1,328,058 |
| Investments — affiliated issuers | (839,649) |
| Capital gain distributions from underlying affiliated funds | 165,397 |
| Foreign currency translations | 39,328 |
| Futures contracts | (7,611,713) |
| Options purchased | 3,982,764 |
| Net realized loss | (2,935,815) |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | (1,023,311) |
| Investments — affiliated issuers | 27,286,990 |
| Foreign currency translations | 6,846 |
| Futures contracts | (1,443,138) |
| Options purchased | 1,239,910 |
| Net change in unrealized appreciation (depreciation) | 26,067,297 |
| Net realized and unrealized gain | 23,131,482 |
| Net increase in net assets resulting from operations | $22,675,800 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Variable Portfolio – Managed Volatility Conservative Fund | Semiannual Report 2020 | 13 |
Statement of Changes in Net Assets
| Six Months Ended June 30, 2020 (Unaudited) | Year Ended December 31, 2019 | |
| Operations | ||
| Net investment income (loss) | $(455,682) | $9,457,622 |
| Net realized gain (loss) | (2,935,815) | 6,851,300 |
| Net change in unrealized appreciation (depreciation) | 26,067,297 | 38,388,994 |
| Net increase in net assets resulting from operations | 22,675,800 | 54,697,916 |
| Increase in net assets from capital stock activity | 163,718,457 | 91,762,250 |
| Total increase in net assets | 186,394,257 | 146,460,166 |
| Net assets at beginning of period | 572,753,866 | 426,293,700 |
| Net assets at end of period | $759,148,123 | $572,753,866 |
| Six Months Ended | Year Ended | |||
| June 30, 2020 (Unaudited) | December 31, 2019 (a) | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 4,290 | 52,686 | 4,222 | 51,550 |
| Redemptions | (209) | (2,544) | (63) | (790) |
| Net increase | 4,081 | 50,142 | 4,159 | 50,760 |
| Class 2 | ||||
| Subscriptions | 15,350,325 | 188,944,819 | 10,555,664 | 128,068,194 |
| Redemptions | (2,003,377) | (25,276,504) | (3,022,427) | (36,356,704) |
| Net increase | 13,346,948 | 163,668,315 | 7,533,237 | 91,711,490 |
| Total net increase | 13,351,029 | 163,718,457 | 7,537,396 | 91,762,250 |
| (a) | Class 1 shares are based on operations from February 20, 2019 (commencement of operations) through the stated period end. |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 14 | Variable Portfolio – Managed Volatility Conservative Fund | Semiannual Report 2020 |
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| Variable Portfolio – Managed Volatility Conservative Fund | Semiannual Report 2020 | 15 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income (loss) | Net realized and unrealized gain (loss) | Total from investment operations | |
| Class 1 | ||||
| Six Months Ended 6/30/2020 (Unaudited) | $12.70 | 0.01 | 0.30 | 0.31 |
| Year Ended 12/31/2019(d) | $11.70 | 0.17 | 0.83 | 1.00 |
| Class 2 | ||||
| Six Months Ended 6/30/2020 (Unaudited) | $12.68 | (0.01) | 0.30 | 0.29 |
| Year Ended 12/31/2019 | $11.33 | 0.23 | 1.12 | 1.35 |
| Year Ended 12/31/2018 | $11.63 | 0.17 | (0.47) | (0.30) |
| Year Ended 12/31/2017 | $10.78 | 0.13 | 0.72 | 0.85 |
| Year Ended 12/31/2016 | $10.46 | 0.09 | 0.23 | 0.32 |
| Year Ended 12/31/2015 | $10.58 | 0.10 | (0.22) | (0.12) |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Annualized. |
| (d) | Class 1 shares commenced operations on February 20, 2019. Per share data and total return reflect activity from that date. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 16 | Variable Portfolio – Managed Volatility Conservative Fund | Semiannual Report 2020 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income (loss) ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Six Months Ended 6/30/2020 (Unaudited) | $13.01 | 2.44% | 0.30%(c) | 0.30%(c) | 0.09%(c) | 71% | $107 |
| Year Ended 12/31/2019(d) | $12.70 | 8.55% | 0.31%(c) | 0.31%(c) | 1.57%(c) | 139% | $53 |
| Class 2 | |||||||
| Six Months Ended 6/30/2020 (Unaudited) | $12.97 | 2.29% | 0.55%(c) | 0.55%(c) | (0.14%)(c) | 71% | $759,041 |
| Year Ended 12/31/2019 | $12.68 | 11.91% | 0.57% | 0.57% | 1.90% | 139% | $572,701 |
| Year Ended 12/31/2018 | $11.33 | (2.58%) | 0.57% | 0.57% | 1.45% | 119% | $426,294 |
| Year Ended 12/31/2017 | $11.63 | 7.88% | 0.55% | 0.55% | 1.17% | 103% | $462,907 |
| Year Ended 12/31/2016 | $10.78 | 3.06% | 0.53% | 0.53% | 0.86% | 106% | $444,792 |
| Year Ended 12/31/2015 | $10.46 | (1.13%) | 0.56% | 0.56% | 0.98% | 142% | $241,975 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – Managed Volatility Conservative Fund | Semiannual Report 2020 | 17 |
Notes to Financial Statements
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Note 1. Organization
Variable Portfolio –
Managed Volatility Conservative Fund (the Fund), a series of Columbia Funds Variable Insurance Trust (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended
(the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
The Fund is a
“fund-of-funds”, investing significantly in affiliated funds managed by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc.
(Ameriprise Financial), its affiliates, or third-party advised (unaffiliated) funds, including exchange-traded funds (collectively, Underlying Funds). The Fund is exposed to the same risks as the Underlying Funds in
direct proportion to the allocation of its assets among the Underlying Funds. For information on the investment strategies and risks of the Underlying Funds, please refer to the Fund’s current prospectus and the
prospectuses of the Underlying Funds, which are available, free of charge, from the Securities and Exchange Commission website at www.sec.gov.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1 and Class 2 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued by
affiliated life insurance companies (Participating Insurance Companies) and other qualified institutional investors (Qualified Investors) authorized by Columbia Management Investment Distributors, Inc. (the
Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by buying a Contract.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on any
exchange are valued at the mean between the closing bid and asked prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Asset- and mortgage-backed
securities are generally valued by pricing services, which utilize pricing models that incorporate the securities’ cash flow and loan performance data. These models also take into account available market data,
including trades, market quotations, and benchmark yield curves for identical or similar securities. Factors used to identify similar securities may include, but are not limited to, issuer, collateral type, vintage,
prepayment speeds, collateral performance, credit ratings, credit enhancement and expected life. Asset-backed securities for which quotations are readily available may also be valued based upon an over-the-counter or
exchange bid quote from an approved independent broker-dealer.
Investments in the Underlying Funds
(other than ETFs) are valued at the latest net asset value reported by those companies as of the valuation time.
Futures and options on futures
contracts are valued based upon the settlement price at the close of regular trading on their principal exchanges or, in the absence of transactions, at the mean of the latest quoted bid and ask prices.
| 18 | Variable Portfolio – Managed Volatility Conservative Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Option contracts are valued at the
mean of the latest quoted bid and ask prices on their primary exchanges. Option contracts, including over-the-counter option contracts, with no readily available market quotations are valued using mid-market
evaluations from independent third-party vendors.
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Foreign currency transactions and
translations
The values of all assets and
liabilities denominated in foreign currencies are generally translated into U.S. dollars at exchange rates determined at the close of regular trading on the New York Stock Exchange. Net realized and unrealized gains
(losses) on foreign currency transactions and translations include gains (losses) arising from the fluctuation in exchange rates between trade and settlement dates on securities transactions, gains (losses) arising
from the disposition of foreign currency and currency gains (losses) between the accrual and payment dates on dividends, interest income and foreign withholding taxes.
For financial statement purposes,
the Fund does not distinguish that portion of gains (losses) on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations
are included with the net realized and unrealized gains (losses) on investments in the Statement of Operations.
Derivative instruments
The Fund invests in certain
derivative instruments, as detailed below, to meet its investment objectives. Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more securities,
currencies, commodities, indices, or other assets or instruments. Derivatives may be used to increase investment flexibility (including to maintain cash reserves while maintaining desired exposure to certain assets),
for risk management (hedging) purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain investment risks,
such as foreign currency exchange rate risk, interest rate risk and credit risk. Derivatives may involve various risks, including the potential inability of the counterparty to fulfill its obligations under the terms
of the contract, the potential for an illiquid secondary market (making it difficult for the Fund to sell or terminate, including at favorable prices) and the potential for market movements which may expose the Fund
to gains or losses in excess of the amount shown in the Statement of Assets and Liabilities. The notional amounts of derivative instruments, if applicable, are not recorded in the financial statements.
A derivative instrument may suffer
a marked-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform its
obligations under the contract. The Fund’s risk of loss from counterparty credit risk on over-the-counter derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by
the Fund and the amount of any variation margin held by the counterparty, plus any replacement costs or related amounts. With exchange-traded or centrally cleared derivatives, there is reduced counterparty credit risk
to the Fund since the clearinghouse or central counterparty (CCP) provides some protection in the case of clearing member default. The clearinghouse or CCP stands between the buyer and the seller of the contract;
therefore, additional counterparty credit risk is failure of the clearinghouse or CCP. However, credit risk still exists in exchange-traded or centrally cleared derivatives with respect to initial and variation margin
that is held in a broker’s customer account. While brokers are required to segregate customer margin from their own assets, in the event
| Variable Portfolio – Managed Volatility Conservative Fund | Semiannual Report 2020 | 19 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
that a broker becomes insolvent or goes into
bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the broker for all its clients, U.S. bankruptcy laws will typically allocate that shortfall on a pro-rata basis across all the
broker’s customers (including the Fund), potentially resulting in losses to the Fund.
In order to better define its
contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement)
or similar agreement with its derivatives contract counterparties. An ISDA Master Agreement is an agreement between the Fund and a counterparty that governs over-the-counter derivatives and typically contains, among
other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset with the counterparty
certain derivative instrument’s payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment
in the event of default (close-out netting), including the bankruptcy or insolvency of the counterparty. Note, however, that bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or
prohibitions against the right of offset or netting in bankruptcy, insolvency or other events.
Collateral (margin) requirements
differ by type of derivative. Margin requirements are established by the clearinghouse or CCP for exchange-traded and centrally cleared derivatives. Brokers can ask for margin in excess of the minimum in certain
circumstances. Collateral terms are contract specific for over-the-counter derivatives. For over-the-counter derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by
netting the marked-to-market amount for each transaction under such agreement and comparing that amount to the value of any variation margin currently pledged by the Fund and/or the counterparty. Generally, the amount
of collateral due from or to a party has to exceed a minimum transfer amount threshold (e.g., $250,000) before a transfer has to be made. To the extent amounts due to the Fund from its counterparties are not fully
collateralized, contractually or otherwise, the Fund bears the risk of loss from counterparty nonperformance. The Fund may also pay interest expense on cash collateral received from the broker. Any interest expense
paid by the Fund is shown on the Statement of Operations. The Fund attempts to mitigate counterparty risk by only entering into agreements with counterparties that it believes have the financial resources to honor
their obligations and by monitoring the financial stability of those counterparties.
Certain ISDA Master Agreements
allow counterparties of over-the-counter derivatives transactions to terminate derivatives contracts prior to maturity in the event the Fund’s net asset value declines by a stated percentage over a specified
time period or if the Fund fails to meet certain terms of the ISDA Master Agreement, which would cause the Fund to accelerate payment of any net liability owed to the counterparty. The Fund also has termination rights
if the counterparty fails to meet certain terms of the ISDA Master Agreement. In determining whether to exercise such termination rights, the Fund would consider, in addition to counterparty credit risk, whether
termination would result in a net liability owed from the counterparty.
For financial reporting purposes,
the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statement of Assets and Liabilities.
Futures contracts
Futures contracts are
exchange-traded and represent commitments for the future purchase or sale of an asset at a specified price on a specified date. The Fund bought and sold futures contracts to produce incremental earnings, to manage the
duration and yield curve exposure of the Fund versus the benchmark, to manage exposure to movements in interest rates, to manage exposure to the securities market and to maintain appropriate equity market exposure
while keeping sufficient cash to accommodate daily redemptions. These instruments may be used for other purposes in future periods. Upon entering into futures contracts, the Fund bears risks that it may not achieve
the anticipated benefits of the futures contracts and may realize a loss. Additional risks include counterparty credit risk, the possibility of an illiquid market, and that a change in the value of the contract or
option may not correlate with changes in the value of the underlying asset.
Upon entering into a futures
contract, the Fund deposits cash or securities with the broker, known as a futures commission merchant (FCM), in an amount sufficient to meet the initial margin requirement. The initial margin deposit must be
maintained at an established level over the life of the contract. Cash deposited as initial margin is recorded in the Statement of Assets and Liabilities as margin deposits. Securities deposited as initial margin are
designated in the Portfolio of Investments. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are
| 20 | Variable Portfolio – Managed Volatility Conservative Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
equal to the daily change in the contract value
and are recorded as variation margin receivable or payable and are offset in unrealized gains or losses. The Fund recognizes a realized gain or loss when the contract is closed or expires. Futures contracts involve,
to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities.
Options contracts
Options are contracts which entitle
the holder to purchase or sell securities or other identified assets at a specified price, or in the case of index option contracts, to receive or pay the difference between the index value and the strike price of the
index option contract. Option contracts can be either exchange-traded or over-the-counter. The Fund purchased option contracts to produce incremental earnings, to decrease the Fund’s exposure to equity market
risk and to increase return on investments and to facilitate buying and selling of securities for investments. These instruments may be used for other purposes in future periods. Completion of transactions for option
contracts traded in the over-the-counter market depends upon the performance of the other party. Cash collateral may be collected or posted by the Fund to secure certain over-the-counter option contract trades. Cash
collateral held or posted by the Fund for such option contract trades must be returned to the broker or the Fund upon closure, exercise or expiration of the contract.
Options contracts purchased are
recorded as investments. When the Fund writes an options contract, the premium received is recorded as an asset and an amount equivalent to the premium is recorded as a liability in the Statement of Assets and
Liabilities and is subsequently adjusted to reflect the current fair value of the option written. Changes in the fair value of the written option are recorded as unrealized appreciation or depreciation until the
contract is exercised or has expired. The Fund will realize a gain or loss when the option contract is closed or expires. When option contracts are exercised, the proceeds on sales for a written call or purchased put
option contract, or the purchase cost for a written put or purchased call option contract, is adjusted by the amount of premium received or paid.
For over-the-counter options
purchased, the Fund bears the risk of loss of the amount of the premiums paid plus the positive change in market values net of any collateral held by the Fund should the counterparty fail to perform under the
contracts. Option contracts written by the Fund do not typically give rise to significant counterparty credit risk, as options written generally obligate the Fund and not the counterparty to perform. The risk in
writing a call option contract is that the Fund gives up the opportunity for profit if the market price of the security increases above the strike price and the option contract is exercised. The risk in writing a put
option contract is that the Fund may incur a loss if the market price of the security decreases below the strike price and the option contract is exercised. Exercise of a written option could result in the Fund
purchasing or selling a security or foreign currency when it otherwise would not, or at a price different from the current market value. In purchasing and writing options, the Fund bears the risk of an unfavorable
change in the value of the underlying instrument or the risk that the Fund may not be able to enter into a closing transaction due to an illiquid market.
Effects of derivative transactions in
the financial statements
The following tables are intended
to provide additional information about the effect of derivatives on the financial statements of the Fund, including: the fair value of derivatives by risk category and the location of those fair values in the
Statement of Assets and Liabilities; and the impact of derivative transactions over the period in the Statement of Operations, including realized and unrealized gains (losses). The derivative instrument schedules
following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any.
| Variable Portfolio – Managed Volatility Conservative Fund | Semiannual Report 2020 | 21 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
The following table is a summary of
the fair value of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) at June 30, 2020:
| Asset derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Equity risk | Component of trust capital — unrealized appreciation on futures contracts | 609,097* |
| Equity risk | Investments, at value — Options Purchased | 6,017,780 |
| Foreign exchange risk | Component of trust capital — unrealized appreciation on futures contracts | 25,837* |
| Interest rate risk | Component of trust capital — unrealized appreciation on futures contracts | 188,082* |
| Total | 6,840,796 |
| Liability derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Equity risk | Component of trust capital - unrealized depreciation on futures contracts | 1,318,990* |
| Foreign exchange risk | Component of trust capital - unrealized depreciation on futures contracts | 10,261* |
| Total | 1,329,251 |
| * | Includes cumulative appreciation (depreciation) as reported in the tables following the Portfolio of Investments. Only the current day’s variation margin is reported in receivables or payables in the Statement of Assets and Liabilities. |
The following table indicates the
effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) in the Statement of Operations for the six months ended June 30, 2020:
| Amount of realized gain (loss) on derivatives recognized in income | |||
| Risk exposure category | Futures contracts ($) | Options contracts purchased ($) | Total ($) |
| Equity risk | (11,476,344) | 3,982,764 | (7,493,580) |
| Foreign exchange risk | (433,825) | — | (433,825) |
| Interest rate risk | 4,298,456 | — | 4,298,456 |
| Total | (7,611,713) | 3,982,764 | (3,628,949) |
| Change in unrealized appreciation (depreciation) on derivatives recognized in income | |||
| Risk exposure category | Futures contracts ($) | Options contracts purchased ($) | Total ($) |
| Equity risk | (2,041,089) | 1,239,910 | (801,179) |
| Foreign exchange risk | (16,349) | — | (16,349) |
| Interest rate risk | 614,300 | — | 614,300 |
| Total | (1,443,138) | 1,239,910 | (203,228) |
The following table is a summary
of the average outstanding volume by derivative instrument for the six months ended June 30, 2020:
| Derivative instrument | Average notional amounts ($)* |
| Futures contracts — long | 120,348,741 |
| Futures contracts — short | 28,518,803 |
| 22 | Variable Portfolio – Managed Volatility Conservative Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
| Derivative instrument | Average value ($)* |
| Options contracts — purchased | 4,588,075 |
| * | Based on the ending quarterly outstanding amounts for the six months ended June 30, 2020. |
Asset- and mortgage-backed
securities
The Fund may invest in asset-backed
and mortgage-backed securities. The maturity dates shown represent the original maturity of the underlying obligation. Actual maturity may vary based upon prepayment activity on these obligations. All, or a portion,
of the obligation may be prepaid at any time because the underlying asset may be prepaid. As a result, decreasing market interest rates could result in an increased level of prepayment. An increased prepayment rate
will have the effect of shortening the maturity of the security. Unless otherwise noted, the coupon rates presented are fixed rates.
Delayed delivery securities
The Fund may trade securities on
other than normal settlement terms, including securities purchased or sold on a “when-issued” or "forward commitment" basis. This may increase risk to the Fund since the other party to the transaction may
fail to deliver, which could cause the Fund to subsequently invest at less advantageous prices. The Fund designates cash or liquid securities in an amount equal to the delayed delivery commitment.
To be announced securities
The Fund may trade securities on a
To Be Announced (TBA) basis. As with other delayed-delivery transactions, a seller agrees to issue a TBA security at a future date. However, the seller does not specify the particular securities to be delivered.
Instead, the Fund agrees to accept any security that meets specified terms.
In some cases, Master Securities
Forward Transaction Agreements (MSFTAs) may be used to govern transactions of certain forward-settling agency mortgage-backed securities, such as delayed-delivery and TBAs, between the Fund and counterparty. The MSFTA
maintains provisions for, among other things, initiation and confirmation, payment and transfer, events of default, termination, and maintenance of collateral relating to such transactions.
Mortgage dollar roll transactions
The Fund may enter into mortgage
“dollar rolls” in which the Fund sells securities for delivery in the current month and simultaneously contracts with the same counterparty to repurchase similar but not identical securities (same type,
coupon and maturity) on a specified future date. During the roll period, the Fund loses the right to receive principal and interest paid on the securities sold. However, the Fund will benefit because it receives
negotiated amounts in the form of reductions of the purchase price for the future purchase plus the interest earned on the cash proceeds of the securities sold until the settlement date of the forward purchase. The
Fund records the incremental difference between the forward purchase and sale of each forward roll as a realized gain or loss. Unless any realized gains exceed the income, capital appreciation, and gain or loss due to
mortgage prepayments that would have been realized on the securities sold as part of the mortgage dollar roll, the use of this technique will diminish the investment performance of the Fund compared to what the
performance would have been without the use of mortgage dollar rolls. All cash proceeds will be invested in instruments that are permissible investments for the Fund. The Fund identifies cash or liquid securities in
an amount equal to the forward purchase price.
For financial reporting and tax
purposes, the Fund treats “to be announced” mortgage dollar rolls as two separate transactions, one involving the purchase of a security and a separate transaction involving a sale. These transactions may
increase the Fund’s portfolio turnover rate. The Fund does not currently enter into mortgage dollar rolls that are accounted for as financing transactions.
Mortgage dollar rolls involve the
risk that the market value of the securities the Fund is obligated to repurchase may decline below the repurchase price, or that the counterparty may default on its obligations.
| Variable Portfolio – Managed Volatility Conservative Fund | Semiannual Report 2020 | 23 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Offsetting of assets and
liabilities
The following table presents the
Fund’s gross and net amount of assets and liabilities available for offset under netting arrangements as well as any related collateral received or pledged by the Fund as of June 30, 2020:
| JPMorgan ($) | |
| Assets | |
| Options purchased puts | 6,017,780 |
| Total financial and derivative net assets | 6,017,780 |
| Total collateral received (pledged) (a) | - |
| Net amount (b) | 6,017,780 |
| (a) | In some instances, the actual collateral received and/or pledged may be more than the amount shown due to overcollateralization. |
| (b) | Represents the net amount due from/(to) counterparties in the event of default. |
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Interest income is recorded on an
accrual basis. Market premiums and discounts, including original issue discounts, are amortized and accreted, respectively, over the expected life of the security on all debt securities, unless otherwise noted. The
Fund classifies gains and losses realized on prepayments received on mortgage-backed securities as adjustments to interest income.
The Fund may place a debt security
on non-accrual status and reduce related interest income when it becomes probable that the interest will not be collected and the amount of uncollectible interest can be reasonably estimated. A defaulted debt security
is removed from non-accrual status when the issuer resumes interest payments or when collectibility of interest is reasonably assured.
Corporate actions and dividend
income are recorded on the ex-dividend date.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a
proportionate change in return of capital to shareholders.
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
Income and capital gain
distributions from the Underlying Funds, if any, are recorded on the ex-dividend date.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
| 24 | Variable Portfolio – Managed Volatility Conservative Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund is treated as a
partnership for federal income tax purposes, and the Fund does not expect to make regular distributions. The Fund will not be subject to federal income tax, and therefore, there is no provision for federal income
taxes. The partners of the Fund are subject to tax on their distributive share of the Fund’s income and loss. The components of the Fund’s net assets are reported at the partner-level for federal income
tax purposes, and therefore, are not presented in the Statement of Assets and Liabilities.
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees and
underlying fund fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager). Under the Management Agreement, the Investment Manager provides the Fund with investment research and advice, as well as
administrative and accounting services. The management services fee is an annual fee that is a blend of (i) 0.02% on assets invested in affiliated underlying funds (including exchange-traded funds and closed-end
funds) that pay a management services fee (or investment advisory services fee, as applicable) to the Investment Manager and (ii) a fee that declines from 0.72% to 0.52%, depending on asset levels, on assets
invested in securities (other than affiliated underlying funds (including exchange-traded funds and closed-end funds) that pay a management services fee (or investment advisory services fee, as applicable) to the
Investment Manager) including other funds advised by the Investment Manager that do not pay a management services fee to the Investment Manager, third party funds, derivatives and individual securities. The annualized
effective management services fee rate for the six months ended June 30, 2020 was 0.22% of the Fund’s average daily net assets.
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 expense and fee
levels and the Fund may own different proportions of Underlying Funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. These expenses are not reflected in the expenses
shown in Statement of Operations and are not included in the ratios to average net assets shown in the Financial Highlights.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. These members of the Board of Trustees
may participate in a Deferred Compensation Plan (the Deferred Plan) which may be terminated at any time. Obligations of the Deferred Plan will be paid solely out of the Fund’s assets, and all amounts payable
under the Deferred Plan constitute a general unsecured obligation of the Fund.
| Variable Portfolio – Managed Volatility Conservative Fund | Semiannual Report 2020 | 25 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The annualized
effective service fee rate for the six months ended June 30, 2020, was 0.06% of the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. The Board of Trustees has approved, and the Fund has adopted, a distribution plan
(the Plan) which sets the distribution fees for the Fund. These fees are calculated daily and are intended to compensate the Distributor for selling shares of the Fund. The Fund pays a monthly distribution fee to the
Distributor at the maximum annual rate of 0.25% of the average daily net assets attributable to Class 2 shares of the Fund. The Fund pays no distribution and service fees for Class 1 shares.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, including indirect expenses of the Underlying Funds, after giving effect to fees waived/expenses reimbursed and any balance credits
and/or overdraft charges from the Fund’s custodian, do not exceed the following annual rate(s) as a percentage of the class’ average daily net assets:
| May 1, 2020 through April 30, 2021 | Prior to May 1, 2020 | |
| Class 1 | 0.80% | 0.85% |
| Class 2 | 1.05 | 1.10 |
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), transaction costs and brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program
fees and expenses, transaction charges and interest on borrowed money, interest, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This
agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements
described above are not recoverable by the Investment Manager or its affiliates in future periods.
| 26 | Variable Portfolio – Managed Volatility Conservative Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Note 4. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $584,362,933 and $408,251,993, respectively, for the six months ended June 30, 2020, of which $428,482,673 and
$383,803,923, respectively, were U.S. government securities. The amount of purchase and sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 5. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes referred to
as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 6. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund did not borrow or lend
money under the Interfund Program during the six months ended June 30, 2020.
Note 7. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by Citibank, N.A., HSBC Bank USA, N.A. and JPMorgan Chase Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. The credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment Manager or an affiliated investment manager, severally and
not jointly, permits collective borrowings up to $1 billion. Interest is charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the
one-month LIBOR rate and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a
commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The commitment fee is included in other expenses in the Statement of Operations. This agreement
expires annually in December unless extended or renewed.
The Fund had no borrowings during
the six months ended June 30, 2020.
Note 8. Significant
risks
Derivatives risk
Losses involving derivative
instruments may be substantial, because a relatively small movement in the underlying reference (which is generally the price, rate or other economic indicator associated with a security(ies), commodity, currency or
index or other instrument or asset) may result in a substantial loss for the Fund. In addition to the potential for increased losses, the use of derivative instruments may lead to increased volatility within the Fund.
Derivatives will typically increase the Fund’s exposure to principal risks to which it is otherwise exposed, and may expose the Fund to additional risks, including correlation risk, counterparty risk, hedging
risk, leverage risk, liquidity risk and pricing risk.
| Variable Portfolio – Managed Volatility Conservative Fund | Semiannual Report 2020 | 27 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Market and environment risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The Fund performance may also be
significantly negatively impacted by the economic impact of the coronavirus disease 2019 (COVID-19) pandemic. Public health crisis has become a pandemic that has resulted in, and may continue to result in, significant
global economic and societal disruption and market volatility due to disruptions in market access, resource availability, facilities operations, imposition of tariffs, export controls and supply chain disruption,
among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement and loss in human and other resources. The uncertainty surrounding the magnitude, duration,
reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as
the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and pandemics that may arise in the future – could negatively affect global economies and markets
in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in emerging market countries may be greater due to generally less established healthcare systems,
governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The disruptions caused
by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively impact the Fund’s ability to achieve their investment objectives. Any such event(s) could
have a significant adverse impact on the value and risk profile of the Fund.
The Investment Manager and its
affiliates have systematically implemented strategies to address the operating environment spurred by the COVID-19 pandemic. To promote the safety and security of our employees and to assure the continuity of our
business operations, we have implemented a work from home protocol for virtually all of our employee population, restricted business travel, and provided resources for complying with the guidance from the World Health
Organization, the U.S. Centers for Disease Control and governments. Our operations teams seek to operate without significant disruptions in service. Our pandemic strategy takes into consideration that a pandemic could
be widespread and may occur in multiple waves, affecting different communities at different times with varying levels of severity. We cannot, however, predict the impact that natural or man-made disasters, including
the COVID-19 pandemic, may have on the ability of our employees and third-party service providers to continue ordinary business operations and technology functions over near- or longer-term periods.
Shareholder concentration risk
At June 30, 2020, affiliated
shareholders of record owned 100.0% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 9. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
| 28 | Variable Portfolio – Managed Volatility Conservative Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Note 10. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial.
| Variable Portfolio – Managed Volatility Conservative Fund | Semiannual Report 2020 | 29 |
Liquidity Risk
Management Program
Pursuant to Rule 22e-4 under the
1940 Act, the Fund has adopted a liquidity risk management program (Program). The Program’s principal objectives include assessing, managing and periodically reviewing the Fund’s liquidity risk. Liquidity
risk is defined as the risk that the Fund could not meet redemption requests without significant dilution of remaining investors’ interests in the Fund.
The Board has appointed the
Investment Manager as the program administrator for the Fund’s Program. The Investment Manager has delegated oversight of the Program to its Liquidity Risk Management Committee (the Committee). At a board
meeting during the fiscal period, the Committee provided the Board with a report addressing the operations of the program and assessing its adequacy and effectiveness of implementation for the period December 1, 2018,
through December 31, 2019, including:
| • | the Fund had sufficient liquidity to both meet redemptions and operate effectively on behalf of shareholders; |
| • | there were no material changes to the Program during the period; |
| • | the implementation of the Program was effective to manage the Fund’s liquidity risk; and |
| • | the Program operated adequately during the period. |
There can be no assurance that the
Program will achieve its objectives in the future. Please refer to the Fund’s prospectus for more information regarding the Fund’s exposure to liquidity risk and other principal risks to which an
investment in the Fund may be subject.
Board Consideration
and Approval of Management
Agreement
On June 17, 2020, the Board of
Trustees (the Board) and the Trustees who are not interested persons (as defined in the Investment Company Act of 1940) (the Independent Trustees) of Columbia Funds Variable Insurance Trust (the Trust) unanimously
approved the continuation of the Management Agreement (the Management Agreement) with Columbia Management Investment Advisers, LLC (the Investment Manager) with respect to Variable Portfolio – Managed Volatility
Conservative Fund (the Fund), a series of the Trust. As detailed below, the Board’s Advisory Fees and Expenses Committee (the Committee) and the Board met on multiple occasions to review and discuss, among
themselves, with the management team of the Investment Manager and with an independent fee consultant, materials provided by the Investment Manager, the independent fee consultant and others before determining to
approve the continuation of the Management Agreement.
In connection with their
deliberations regarding the continuation of the Management Agreement, the Committee and the Board evaluated materials requested from the Investment Manager regarding the Fund and the Management Agreement, and
discussed these materials with representatives of the Investment Manager at Committee meetings held on March 10, 2020, April 30, 2020 and June 17, 2020 and at Board meetings held on March 11, 2020 and June 17, 2020.
In addition, the Board and its various committees consider matters bearing on the Management Agreement at other meetings throughout the year and in prior years and meet regularly with senior management of the Trust
and the Investment Manager. Through the Board’s Investment Oversight Committees, Trustees also meet with selected portfolio managers of the funds the Trustees oversee and with other investment personnel at
various times throughout the year. The Committee and the Board also consulted with the independent fee consultant, Fund counsel and the Independent Trustees’ independent legal counsel, who advised on various
matters with respect to the Committee’s and the Board’s considerations and otherwise assisted the Committee and the Board in their deliberations. On June 17, 2020, the Committee recommended that the Board
approve the continuation of the Management Agreement. On June 17, 2020, the Board, including the Independent Trustees, voting separately, unanimously approved the continuation of the Management Agreement for the
Fund.
| 30 | Variable Portfolio – Managed Volatility Conservative Fund | Semiannual Report 2020 |
Board Consideration and Approval of
Management
Agreement (continued)
The Committee and the Board considered all
information that they, their legal counsel or the Investment Manager believed reasonably necessary to evaluate and to determine whether to recommend for approval or approve the continuation of the Management
Agreement. The information and factors considered by the Committee and the Board in recommending for approval or approving the continuation of the Management Agreement for the Fund included the following:
| • | Information on the investment performance of the Fund relative to the performance of a group of mutual funds determined to be comparable to the Fund by the Investment Manager, as well as performance relative to benchmarks; |
| • | Information on the Fund’s management fees and total expenses, including information comparing the Fund’s expenses to those of a group of comparable mutual funds, as determined by the Investment Manager; |
| • | The Investment Manager’s agreement to contractually limit or cap total operating expenses for the Fund through April 30, 2021 so that total operating expenses (excluding certain fees and expenses, such as transaction costs and certain other investment related expenses, interest, taxes, and infrequent and/or unusual expenses) would not exceed a specified annual rate, as a percentage of the Fund’s net assets; |
| • | The terms and conditions of the Management Agreement; |
| • | The current and proposed terms and conditions of other agreements and arrangements with affiliates of the Investment Manager relating to the operations of the Fund, including agreements with respect to the provision of distribution, transfer agency and shareholder services to the Fund; |
| • | Descriptions of various functions performed by the Investment Manager under the Management Agreement, including portfolio management and portfolio trading practices; |
| • | Information regarding any recently negotiated management fees of similarly-managed portfolios of other institutional clients of the Investment Manager; |
| • | Information regarding the reputation, regulatory history and resources of the Investment Manager, including information regarding senior management, portfolio managers and other personnel; |
| • | Information regarding the capabilities of the Investment Manager with respect to compliance monitoring services, including an assessment of the Investment Manager’s compliance system by the Fund’s Chief Compliance Officer; and |
| • | The profitability to the Investment Manager and its affiliates from their relationships with the Fund. |
Nature, extent and quality of
services provided under the Management Agreement
The Committee and the Board
considered the nature, extent and quality of services provided to the Fund by the Investment Manager and its affiliates under the Management Agreement and under separate agreements for the provision of transfer agency
and shareholder services, and the resources dedicated to the Fund and the other Columbia Funds by the Investment Manager and its affiliates. The Committee and the Board considered, among other things, the Investment
Manager’s ability to attract, motivate and retain highly qualified research, advisory and supervisory investment professionals (including compensation programs for personnel involved in fund management,
reputation and other attributes), the portfolio management services provided by those investment professionals, and the quality of the Investment Manager’s investment research capabilities and trade execution
services. The Committee and the Board also considered the potential benefits to shareholders of investing in a mutual fund that is part of a fund complex offering exposure to a variety of asset classes and investment
disciplines and providing a variety of fund and shareholder services.
The Committee and the Board also
considered the professional experience and qualifications of the senior personnel of the Investment Manager, which included consideration of the Investment Manager’s experience with funds using an investment
strategy similar to that used by the Investment Manager for the Fund. The Committee and the Board noted the compliance programs of and the compliance-related resources provided to the Fund by the Investment Manager
and its affiliates and the resources dedicated by the Investment Manager and its affiliates to risk management, and considered the Investment Manager’s ability to provide administrative services to the Fund and
coordinate the activities of the Fund’s other service
| Variable Portfolio – Managed Volatility Conservative Fund | Semiannual Report 2020 | 31 |
Board Consideration and Approval of
Management
Agreement (continued)
providers. After reviewing these and related
factors, the Committee and the Board concluded, within the context of their overall conclusions, that the nature, extent and quality of the services provided to the Fund under the Management Agreement supported the
continuation of the Management Agreement.
Investment performance
The Committee and the Board
reviewed information about the performance of the Fund over various time periods, including performance information relative to benchmarks, information that compared the performance of the Fund to the performance of a
group of comparable mutual funds as determined by the Investment Manager, and information and analysis provided by the independent fee consultant. The Committee and the Board also reviewed a description of the
Investment Manager’s methodology for identifying the Fund’s peer groups for purposes of performance and expense comparisons. Although the Fund’s performance lagged that of a relevant peer group for
certain (although not necessarily all) periods, the Committee and the Board concluded that other factors relevant to performance were sufficient, in light of other considerations, to support continuation of the
Management Agreement. Those factors included one or more of the following: (i) that the Fund’s performance, although lagging in certain recent periods, was stronger over the longer term; (ii) that the
underperformance was attributable, to a significant extent, to investment decisions that were reasonable and consistent with the Fund’s investment strategy and policies and that the Fund was performing within a
reasonable range of expectations, given those investment decisions, market conditions and the Fund’s investment strategy; (iii) that the Fund’s performance was competitive when compared to other relevant
performance benchmarks or peer groups; and (iv) that the Investment Manager had taken or was taking steps designed to help improve the Fund’s investment performance, including, but not limited to, replacing
portfolio managers, enhancing the resources supporting the portfolio managers, or modifying investment strategies.
The Committee and the Board noted
that, through December 31, 2019, the Fund’s performance was in the sixty-third, sixty-fourth and seventy-fourth percentile (where the best performance would be in the first percentile) of its category selected
by the Investment Manager for the purposes of performance comparisons for the one-, three- and five-year periods, respectively.
The Committee and the Board also
considered the Investment Manager’s performance and reputation generally, the Investment Manager’s historical responsiveness to Board concerns about performance, and the Investment Manager’s
willingness to take steps intended to improve performance. After reviewing these and related factors, the Committee and the Board concluded, within the context of their overall conclusions, that the performance of the
Fund and the Investment Manager was sufficient, in light of other considerations, to support the continuation of the Management Agreement.
Investment management fee rates
and other expenses
The Committee and the Board
considered the management fees charged to the Fund under the Management Agreement as well as the total expenses incurred by the Fund. In assessing the reasonableness of the fees under the Management Agreement, the
Committee and the Board considered, among other information, the Fund’s total expense ratio as a percentage of average daily net assets. The Committee and the Board considered data provided by the Investment
Manager and the independent fee consultant. The Committee and the Board noted that, as of December 31, 2019, the Fund’s actual management fee and net total expense ratio were ranked in the third and second
quintiles, respectively (where the lowest fees and expenses would be in the first quintile) against the Fund’s expense universe as determined by the Investment Manager for purposes of expense comparison. The
Committee and the Board also took into account the fee waiver and expense limitation arrangements agreed to by the Investment Manager, as noted above.
The Committee and the Board also
received and considered information about the management fees charged by the Investment Manager to institutional accounts. In considering the fees charged to those accounts, the Committee and the Board took into
account, among other things, the Investment Manager’s representations about the differences between managing mutual funds as compared to other types of accounts, including differences in the services provided,
differences in the risk profile of such business for the Investment Manager and the additional resources required to manage mutual funds effectively. The Committee and the Board also received and considered
information about the fees charged by the Investment Manager for sub-advisory services it provides to comparable unaffiliated funds. In evaluating the Fund’s management fees, the Committee and the Board also
took into account the demands, complexity and quality of the investment management of the Fund.
| 32 | Variable Portfolio – Managed Volatility Conservative Fund | Semiannual Report 2020 |
Board Consideration and Approval of
Management
Agreement (continued)
After reviewing these and related factors, the
Committee and the Board concluded, within the context of their overall conclusions, that the management fee rates and expenses of the Fund, in light of other considerations, supported the continuation of the
Management Agreement.
Costs of services provided and
profitability
The Committee and the Board also
took note of the costs the Investment Manager and its affiliates incur in connection with the services provided and the profitability to the Investment Manager and its affiliates from their relationships with the
Fund, and the efforts undertaken by the Investment Manager and its affiliates to manage efficiently their costs to provide such services.
The Committee and the Board also
considered the compensation directly or indirectly received by the Investment Manager’s affiliates in connection with their relationships with the Fund. The Committee and the Board reviewed information provided
by management as to the profitability to the Investment Manager and its affiliates of their relationships with the Fund, information about the allocation of expenses used to calculate profitability, and comparisons of
profitability levels realized in 2019 to profitability levels realized in 2018. When reviewing profitability, the Committee and the Board also considered court cases in which adviser profitability was an issue in
whole or in part, the performance of similarly managed funds, the performance of the Fund, and the expense ratio of the Fund. In addition, the Committee and the Board considered information provided by the Investment
Manager regarding the Investment Manager’s financial condition and comparing its profitability to that of other asset management firms that are, or are subsidiaries of, publicly traded companies. In this regard,
the Committee and the Board also considered data provided by the independent fee consultant.
After reviewing these and related
factors, the Committee and the Board concluded, within the context of their overall conclusions, that the costs of services provided and the profitability to the Investment Manager and its affiliates from their
relationships with the Fund supported the continuation of the Management Agreement.
Economies of scale
The Committee and the Board
considered the potential existence of economies of scale in the provision by the Investment Manager of services to the Fund, to groups of related funds, and to the Investment Manager’s investment advisory
clients as a whole, and whether those economies of scale were shared with the Fund through breakpoints in investment management fees or other means, such as expense limitation arrangements and additional investments
by the Investment Manager in investment, trading, compliance and other resources. The Committee and the Board noted that the management fee schedules for the Fund contained breakpoints that would reduce the fee rate
on assets above specified threshold levels.
In considering these matters, the
Committee and the Board also considered the costs of the services provided and the profitability to the Investment Manager and its affiliates from their relationships with the Fund, as noted above. After reviewing
these and related factors, the Committee and the Board concluded, within the context of their overall conclusions, that the extent to which any economies of scale were expected to be shared with the Fund supported the
continuation of the Management Agreement.
Other benefits to the Investment
Manager
The Committee and the Board
received and considered information regarding “fall-out” or ancillary benefits received by the Investment Manager and its affiliates as a result of their relationships with the Fund, such as the engagement
of the Investment Manager’s affiliates to provide distribution, transfer agency and shareholder services to the Fund. In this regard, among other matters, the Committee and the Board considered that the
Fund’s distributor retains a portion of the distribution fees from the Fund. The Committee and the Board also considered the benefits of research made available to the Investment Manager by reason of brokerage
commissions generated by the Fund’s securities transactions, and reviewed information about the Investment Manager’s practices with respect to considering brokerage and research services when allocating
portfolio transactions. In this connection, the Board also noted that the amount of research made available to the Investment Manager by reason of brokerage commissions had been declining over time, and may decline
further. The Committee and the Board also considered the tax benefits provided to affiliates of the Investment Manager as a result of the election by certain Funds to be taxed as partnerships. The Committee and the
Board recognized that the Investment Manager’s profitability would be somewhat lower without these benefits.
| Variable Portfolio – Managed Volatility Conservative Fund | Semiannual Report 2020 | 33 |
Board Consideration and Approval of
Management
Agreement (continued)
Conclusion
The Committee and the Board
reviewed all of the above considerations in reaching their decisions to recommend or approve the continuation of the Management Agreement. In their deliberations, the Trustees did not identify any particular
information that was all-important or controlling, and individual Trustees may have attributed different weights to the various factors. Based on their evaluation of all factors that they deemed to be material,
including those factors described above, and assisted by the advice of independent legal counsel, the Board, including the Independent Trustees, voting separately, unanimously approved the continuation of the
Management Agreement.
Results of Meeting of
Shareholders
At a Joint Special Meeting of
Shareholders held on April 16, 2020, shareholders of Columbia Funds Variable Insurance Trust elected each of the ten nominees for the trustees to the Board of Trustees of Columbia Funds Variable Insurance Trust, each
to hold office until he or she dies, resigns or is removed or, if sooner, until the next meeting of shareholders called for the purpose of electing trustees and until the election and qualification of his or her
successor, as follows:
| Trustee | Votes For | Votes Withheld | Abstentions |
| Janet L. Carrig | 26,231,108,809 | 1,129,334,152 | 0 |
| J. Kevin Connaughton | 26,249,644,638 | 1,110,798,323 | 0 |
| Olive Darragh | 26,323,990,658 | 1,036,452,304 | 0 |
| Douglas A. Hacker | 26,255,762,920 | 1,104,680,042 | 0 |
| Nancy T. Lukitsh | 26,332,381,722 | 1,028,061,240 | 0 |
| David M. Moffett | 26,252,719,395 | 1,107,723,567 | 0 |
| John J. Neuhauser | 26,222,694,456 | 1,137,748,505 | 0 |
| Christopher O. Petersen | 26,265,703,212 | 1,094,739,749 | 0 |
| Patrick J. Simpson | 26,222,908,024 | 1,137,534,938 | 0 |
| Natalie A. Trunow | 26,340,164,732 | 1,020,278,229 | 0 |
| 34 | Variable Portfolio – Managed Volatility Conservative Fund | Semiannual Report 2020 |
[THIS PAGE INTENTIONALLY LEFT
BLANK]
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 225 Franklin Street, Boston, MA
02110-2804
© 2020 Columbia Management Investment
Advisers, LLC.
S-6627 AP (8/20)
Variable Portfolio
– U.S. Flexible Conservative Growth Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
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| 10 | |
| 11 | |
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| 14 | |
| 16 | |
| 29 | |
| 29 | |
| 33 |
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which Variable Portfolio – U.S. Flexible Conservative Growth Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov.
Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge
by visiting columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT, and for reporting periods ended prior to March 31, 2019, on Form N-Q. The Fund’s Form N-Q and Form N-PORT
filings are available on the SEC’s website at sec.gov. The Fund’s complete schedule of portfolio holdings, as filed on Form N-Q or Form N-PORT, can also be obtained without charge, upon request, by calling
800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
225 Franklin Street
Boston, MA 02110
Fund distributor
Columbia Management Investment Distributors,
Inc.
225 Franklin Street
Boston, MA 02110
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Variable Portfolio – U.S. Flexible
Conservative Growth Fund | Semiannual Report 2020
Fund at a Glance
(Unaudited)
(Unaudited)
Investment objective
The Fund
pursues total return while seeking to manage the Fund’s exposure to equity market volatility.
Portfolio management
Brian Virginia
Lead Portfolio Manager
Managed Fund since 2016
Anwiti Bahuguna, Ph.D.
Portfolio Manager
Managed Fund since 2016
David Weiss, CFA
Portfolio Manager
Managed Fund since 2016
Joshua Kutin, CFA
Portfolio Manager
Managed Fund since 2018
| Variable Portfolio – U.S. Flexible Conservative Growth Fund | Semiannual Report 2020 | 3 |
Fund at a Glance (continued)
(Unaudited)
(Unaudited)
| Portfolio Allocation (%) (at June 30, 2020) | |
| Allocations to Underlying Funds | |
| Equity Funds | 27.1 |
| U.S. Large Cap | 27.1 |
| Exchange-Traded Fixed Income Funds | 7.9 |
| Investment Grade | 7.9 |
| Fixed Income Funds | 33.8 |
| High Yield | 1.9 |
| Investment Grade | 31.9 |
| Allocations to Tactical Assets | |
| Money Market Fund Shares Held to Cover Open Derivatives Instruments(a) | 13.9 |
| Options Purchased Puts | 0.6 |
| Residential Mortgage-Backed Securities - Agency | 16.7 |
| Total | 100.0 |
| (a) | Includes investments in Money Market Funds (amounting to $62.8 million) which have been segregated to cover obligations relating to the Fund’s investment in derivatives as part of its tactical allocation strategy. For a description of the Fund’s investments in derivatives, see Investments in derivatives following the Portfolio of Investments and Note 2 to the Notes to Financial Statements. |
Percentages indicated are based upon
total investments including options purchased and excluding all other investments in derivatives, if any. The Fund’s portfolio composition is subject to change.
| 4 | Variable Portfolio – U.S. Flexible Conservative Growth Fund | Semiannual Report 2020 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount 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 results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
In addition to the ongoing expenses
which the Fund bears directly, the Fund’s shareholders indirectly bear the Fund’s allocable share of the costs and expenses of each underlying fund in which the Fund invests. You can also estimate the
effective expenses paid during the period, which includes the indirect fees associated with investing in the underlying funds, by using the amounts listed in the "Effective expenses paid during the period" column.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
| January 1, 2020 — June 30, 2020 | ||||||||||
| Account value at the beginning of the period ($) | Account value at the end of the period ($) | Expenses paid during the period ($) | Fund’s annualized expense ratio (%) | Effective expenses paid during the period ($) | Fund’s effective annualized expense ratio (%) | |||||
| Actual | Hypothetical | Actual | Hypothetical | Actual | Hypothetical | Actual | Actual | Hypothetical | Actual | |
| Class 1 | 1,000.00 | 1,000.00 | 999.20 | 1,023.32 | 1.54 | 1.56 | 0.31 | 3.48 | 3.52 | 0.70 |
| Class 2 | 1,000.00 | 1,000.00 | 998.40 | 1,022.03 | 2.83 | 2.87 | 0.57 | 4.77 | 4.83 | 0.96 |
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 366.
Effective expenses paid during the
period and the Fund’s effective annualized expense ratio include expenses borne directly to the class plus the Fund’s pro rata portion of the ongoing expenses charged by the underlying funds using the
expense ratio of each class of the underlying funds as of the underlying fund’s most recent shareholder report.
| Variable Portfolio – U.S. Flexible Conservative Growth Fund | Semiannual Report 2020 | 5 |
Portfolio of Investments
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
(Percentages represent value of
investments compared to net assets)
Investments in securities
At June 30, 2020,
securities and/or cash totaling $7,450,412 were pledged as collateral.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 6 | Variable Portfolio – U.S. Flexible Conservative Growth Fund | Semiannual Report 2020 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Investments in derivatives
| Long futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| S&P 500 Index E-mini | 59 | 09/2020 | USD | 9,116,090 | 261,921 | — |
| U.S. Long Bond | 79 | 09/2020 | USD | 14,106,438 | 26,254 | — |
| U.S. Treasury 10-Year Note | 143 | 09/2020 | USD | 19,901,578 | 52,222 | — |
| U.S. Treasury 2-Year Note | 63 | 09/2020 | USD | 13,912,172 | 1,514 | — |
| U.S. Treasury 5-Year Note | 153 | 09/2020 | USD | 19,238,555 | 41,523 | — |
| U.S. Ultra Treasury Bond | 27 | 09/2020 | USD | 5,890,219 | — | (22,202) |
| Total | 383,434 | (22,202) | ||||
| Short futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| S&P 500 Index E-mini | (406) | 09/2020 | USD | (62,731,060) | — | (1,412,051) |
| S&P/TSX 60 Index | (8) | 09/2020 | CAD | (1,485,600) | — | (33,327) |
| Total | — | (1,445,378) | ||||
| Put option contracts purchased | ||||||||
| Description | Counterparty | Trading currency | Notional amount | Number of contracts | Exercise price/Rate | Expiration date | Cost ($) | Value ($) |
| S&P 500 Index | JPMorgan | USD | 26,042,436 | 84 | 2,500.00 | 12/17/2021 | 1,417,045 | 1,541,400 |
| S&P 500 Index | JPMorgan | USD | 12,401,160 | 40 | 2,600.00 | 12/17/2021 | 689,030 | 902,800 |
| S&P 500 Index | JPMorgan | USD | 2,480,232 | 8 | 2,400.00 | 12/17/2021 | 145,081 | 127,520 |
| Total | 2,251,156 | 2,571,720 | ||||||
| Cleared credit default swap contracts - sell protection | ||||||||||||
| Reference entity | Counterparty | Maturity date | Receive fixed rate (%) | Payment frequency | Implied credit spread (%)* | Notional currency | Notional amount | Value ($) | Upfront payments ($) | Upfront receipts ($) | Unrealized appreciation ($) | Unrealized depreciation ($) |
| Markit CDX North America Investment Grade Index, Series 34 | Morgan Stanley | 06/20/2025 | 1.000 | Quarterly | 0.762 | USD | 18,000,000 | 273,737 | — | — | 273,737 | — |
| * | Implied credit spreads, represented in absolute terms, utilized in determining the market value of credit default swap agreements on corporate or sovereign issues as of period end serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement. |
Notes to Portfolio of
Investments
| (a) | As defined in the Investment Company Act of 1940, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the period ended June 30, 2020 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Capital gain distributions($) | Realized gain (loss)($) | Dividends — affiliated issuers ($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.253% | |||||||||
| 62,412,483 | 82,251,205 | (81,864,211) | 8,129 | 62,807,606 | — | (2,863) | 305,720 | 62,807,606 | |
| Columbia Variable Portfolio – Disciplined Core Fund, Class 1 Shares | |||||||||
| 10,043,912 | 4,131,641 | (1,043,105) | 387,285 | 13,519,733 | — | (89,766) | — | 237,605 | |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – U.S. Flexible Conservative Growth Fund | Semiannual Report 2020 | 7 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Notes
to Portfolio of Investments (continued)
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Capital gain distributions($) | Realized gain (loss)($) | Dividends — affiliated issuers ($) | End of period shares |
| Columbia Variable Portfolio – Income Opportunities Fund, Class 1 Shares | |||||||||
| 6,616,297 | 2,578,735 | (308,069) | (124,592) | 8,762,371 | — | (16,654) | — | 1,195,412 | |
| Columbia Variable Portfolio – Intermediate Bond Fund, Class 1 Shares | |||||||||
| 22,647,920 | 6,819,121 | (1,070,599) | 1,904,711 | 30,301,153 | — | 8,548 | — | 2,667,355 | |
| Columbia Variable Portfolio - Large Cap Index Fund, Class 1 Shares | |||||||||
| 20,099,279 | 8,215,958 | (1,899,857) | 579,008 | 26,994,388 | — | (160,473) | — | 1,077,190 | |
| Columbia Variable Portfolio – Limited Duration Credit Fund, Class 1 Shares | |||||||||
| 6,662,698 | 2,195,282 | (244,361) | 295,247 | 8,908,866 | — | (415) | — | 884,694 | |
| Columbia Variable Portfolio – Long Government/Credit Bond Fund, Class 1 Shares | |||||||||
| 5,414,795 | 1,387,196 | (367,839) | 855,483 | 7,289,635 | — | 232 | — | 582,239 | |
| Columbia Variable Portfolio – Select Large Cap Value Fund, Class 1 Shares | |||||||||
| 10,064,800 | 5,776,771 | (1,663,927) | (662,611) | 13,515,033 | — | (294,226) | — | 573,400 | |
| Columbia Variable Portfolio – U.S. Government Mortgage Fund, Class 1 Shares | |||||||||
| 6,664,795 | 2,240,637 | (253,839) | 247,713 | 8,899,306 | — | (48) | — | 812,722 | |
| CTIVP® – American Century Diversified Bond Fund, Class 1 Shares | |||||||||
| 21,912,796 | 7,114,914 | (868,052) | 1,175,203 | 29,334,861 | — | (1,081) | — | 2,553,078 | |
| CTIVP® – Loomis Sayles Growth Fund, Class 1 Shares | |||||||||
| 10,043,110 | 3,068,116 | (1,110,804) | 1,545,945 | 13,546,367 | — | 37,153 | — | 328,397 | |
| CTIVP® – Morgan Stanley Advantage Fund, Class 1 Shares | |||||||||
| 10,031,491 | 3,358,748 | (3,257,603) | 3,760,676 | 13,893,312 | — | 460,608 | — | 294,724 | |
| CTIVP® – T. Rowe Price Large Cap Value Fund, Class 1 Shares | |||||||||
| 10,057,817 | 5,910,712 | (1,170,622) | (1,388,105) | 13,409,802 | — | (241,927) | — | 627,800 | |
| CTIVP® – TCW Core Plus Bond Fund, Class 1 Shares | |||||||||
| 21,218,272 | 6,497,496 | (804,234) | 1,497,805 | 28,409,339 | — | (516) | — | 2,430,226 | |
| CTIVP® – Wells Fargo Short Duration Government Fund, Class 1 Shares | |||||||||
| 3,043,276 | 1,028,447 | (106,645) | 104,814 | 4,069,892 | — | (7) | — | 383,952 | |
| Variable Portfolio - Partners Core Bond Fund, Class 1 Shares | |||||||||
| 19,634,612 | 6,120,657 | (786,837) | 1,342,912 | 26,311,344 | — | 667 | — | 2,226,002 | |
| Variable Portfolio - Partners Core Equity Fund, Class 1 Shares | |||||||||
| 20,093,120 | 8,449,335 | (1,837,458) | 270,046 | 26,975,043 | — | (180,770) | — | 1,184,675 | |
| Total | 266,661,473 | 11,799,669 | 336,948,051 | — | (481,538) | 305,720 | |||
| (b) | Non-income producing investment. |
| (c) | Represents a security purchased on a when-issued basis. |
| (d) | The rate shown is the seven-day current annualized yield at June 30, 2020. |
Abbreviation Legend
| TBA | To Be Announced |
Currency Legend
| CAD | Canada Dollar |
| USD | US Dollar |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 8 | Variable Portfolio – U.S. Flexible Conservative Growth Fund | Semiannual Report 2020 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Certain investments that have been
measured at fair value using the net asset value (NAV) per share (or its equivalent) are not categorized in the fair value hierarchy. The fair value amounts presented in the table are intended to reconcile the fair
value hierarchy to the amounts presented in the Portfolio of Investments. The Variable Portfolios serve as investment vehicles for variable annuity contracts and variable life insurance policies. Principle investment
strategies within these Variable Portfolios vary based on the Portfolios investment objective. Investments in the Variable Portfolios may be redeemed on a daily basis without restriction.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at June 30, 2020:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Assets at NAV ($) | Total ($) | |
| Investments in Securities | |||||
| Equity Funds | — | — | — | 121,853,678 | 121,853,678 |
| Exchange-Traded Fixed Income Funds | 35,677,510 | — | — | — | 35,677,510 |
| Fixed Income Funds | — | — | — | 152,286,767 | 152,286,767 |
| Residential Mortgage-Backed Securities - Agency | — | 75,243,223 | — | — | 75,243,223 |
| Options Purchased Puts | 2,571,720 | — | — | — | 2,571,720 |
| Money Market Funds | 62,807,606 | — | — | — | 62,807,606 |
| Total Investments in Securities | 101,056,836 | 75,243,223 | — | 274,140,445 | 450,440,504 |
| Investments in Derivatives | |||||
| Asset | |||||
| Futures Contracts | 383,434 | — | — | — | 383,434 |
| Swap Contracts | — | 273,737 | — | — | 273,737 |
| Liability | |||||
| Futures Contracts | (1,467,580) | — | — | — | (1,467,580) |
| Total | 99,972,690 | 75,516,960 | — | 274,140,445 | 449,630,095 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The Fund’s assets assigned to
the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical
assets.
Futures contracts and swap contracts
are valued at unrealized appreciation (depreciation).
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – U.S. Flexible Conservative Growth Fund | Semiannual Report 2020 | 9 |
Statement of Assets and Liabilities
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $108,787,618) | $110,920,733 |
| Affiliated issuers (cost $305,425,849) | 336,948,051 |
| Options purchased (cost $2,251,156) | 2,571,720 |
| Margin deposits on: | |
| Futures contracts | 6,772,515 |
| Swap contracts | 677,897 |
| Receivable for: | |
| Investments sold | 11,823 |
| Capital shares sold | 10,361 |
| Dividends | 13,300 |
| Interest | 80,184 |
| Variation margin for futures contracts | 126,359 |
| Variation margin for swap contracts | 25,039 |
| Trustees’ deferred compensation plan | 18,654 |
| Total assets | 458,176,636 |
| Liabilities | |
| Payable for: | |
| Investments purchased on a delayed delivery basis | 75,275,302 |
| Capital shares purchased | 27,251 |
| Variation margin for futures contracts | 961,114 |
| Management services fees | 2,279 |
| Distribution and/or service fees | 2,598 |
| Service fees | 18,679 |
| Compensation of board members | 2,606 |
| Compensation of chief compliance officer | 22 |
| Other expenses | 26,399 |
| Trustees’ deferred compensation plan | 18,654 |
| Total liabilities | 76,334,904 |
| Net assets applicable to outstanding capital stock | $381,841,732 |
| Represented by | |
| Trust capital | $381,841,732 |
| Total - representing net assets applicable to outstanding capital stock | $381,841,732 |
| Class 1 | |
| Net assets | $20,926 |
| Shares outstanding | 1,658 |
| Net asset value per share | $12.62 |
| Class 2 | |
| Net assets | $381,820,806 |
| Shares outstanding | 30,352,220 |
| Net asset value per share | $12.58 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 10 | Variable Portfolio – U.S. Flexible Conservative Growth Fund | Semiannual Report 2020 |
Statement of Operations
Six Months Ended June 30, 2020 (Unaudited)
Six Months Ended June 30, 2020 (Unaudited)
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $317,499 |
| Dividends — affiliated issuers | 305,720 |
| Interest | 8,333 |
| Total income | 631,552 |
| Expenses: | |
| Management services fees | 368,244 |
| Distribution and/or service fees | |
| Class 2 | 414,423 |
| Service fees | 99,931 |
| Compensation of board members | 8,656 |
| Custodian fees | 12,057 |
| Printing and postage fees | 8,285 |
| Audit fees | 19,642 |
| Legal fees | 3,822 |
| Compensation of chief compliance officer | 52 |
| Other | 5,273 |
| Total expenses | 940,385 |
| Net investment loss | (308,833) |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 1,281,747 |
| Investments — affiliated issuers | (481,538) |
| Foreign currency translations | (4,971) |
| Futures contracts | (13,632,292) |
| Options purchased | 4,685,995 |
| Swap contracts | 42,300 |
| Net realized loss | (8,108,759) |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | 780,032 |
| Investments — affiliated issuers | 11,799,669 |
| Foreign currency translations | 4,974 |
| Futures contracts | (2,277,891) |
| Options purchased | 733,671 |
| Swap contracts | 273,737 |
| Net change in unrealized appreciation (depreciation) | 11,314,192 |
| Net realized and unrealized gain | 3,205,433 |
| Net increase in net assets resulting from operations | $2,896,600 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Variable Portfolio – U.S. Flexible Conservative Growth Fund | Semiannual Report 2020 | 11 |
Statement of Changes in Net Assets
| Six Months Ended June 30, 2020 (Unaudited) | Year Ended December 31, 2019 | |
| Operations | ||
| Net investment income (loss) | $(308,833) | $2,965,061 |
| Net realized gain (loss) | (8,108,759) | 2,892,937 |
| Net change in unrealized appreciation (depreciation) | 11,314,192 | 21,480,197 |
| Net increase in net assets resulting from operations | 2,896,600 | 27,338,195 |
| Increase in net assets from capital stock activity | 90,014,898 | 122,530,566 |
| Total increase in net assets | 92,911,498 | 149,868,761 |
| Net assets at beginning of period | 288,930,234 | 139,061,473 |
| Net assets at end of period | $381,841,732 | $288,930,234 |
| Six Months Ended | Year Ended | |||
| June 30, 2020 (Unaudited) | December 31, 2019 (a) | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 1,443 | 17,080 | 221 | 2,540 |
| Redemptions | (6) | (77) | — | — |
| Net increase | 1,437 | 17,003 | 221 | 2,540 |
| Class 2 | ||||
| Subscriptions | 8,774,273 | 106,366,528 | 11,038,892 | 131,914,768 |
| Redemptions | (1,346,195) | (16,368,633) | (787,233) | (9,386,742) |
| Net increase | 7,428,078 | 89,997,895 | 10,251,659 | 122,528,026 |
| Total net increase | 7,429,515 | 90,014,898 | 10,251,880 | 122,530,566 |
| (a) | Class 1 shares are based on operations from February 20, 2019 (commencement of operations) through the stated period end. |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 12 | Variable Portfolio – U.S. Flexible Conservative Growth Fund | Semiannual Report 2020 |
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BLANK]
| Variable Portfolio – U.S. Flexible Conservative Growth Fund | Semiannual Report 2020 | 13 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income (loss) | Net realized and unrealized gain (loss) | Total from investment operations | |
| Class 1 | ||||
| Six Months Ended 6/30/2020 (Unaudited) | $12.63 | (0.00)(c) | (0.01)(d) | (0.01) |
| Year Ended 12/31/2019(f) | $11.47 | 0.20 | 0.96 | 1.16 |
| Class 2 | ||||
| Six Months Ended 6/30/2020 (Unaudited) | $12.60 | (0.01) | (0.01)(d) | (0.02) |
| Year Ended 12/31/2019 | $10.97 | 0.17 | 1.46 | 1.63 |
| Year Ended 12/31/2018 | $11.25 | 0.11 | (0.39) | (0.28) |
| Year Ended 12/31/2017 | $10.07 | 0.09 | 1.09 | 1.18 |
| Year Ended 12/31/2016(g) | $10.00 | (0.02) | 0.09 | 0.07 |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Rounds to zero. |
| (d) | Calculation of the net gain (loss) per share (both realized and unrealized) does not correlate to the aggregate realized and unrealized gain (loss) presented in the Statement of Operations due to the timing of subscriptions and redemptions of Fund shares in relation to fluctuations in the market value of the portfolio. |
| (e) | Annualized. |
| (f) | Class 1 shares commenced operations on February 20, 2019. Per share data and total return reflect activity from that date. |
| (g) | The Fund commenced operations on November 2, 2016. Per share data and total return reflect activity from that date. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 14 | Variable Portfolio – U.S. Flexible Conservative Growth Fund | Semiannual Report 2020 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income (loss) ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Six Months Ended 6/30/2020 (Unaudited) | $12.62 | (0.08%) | 0.31%(e) | 0.31%(e) | (0.03%)(e) | 87% | $21 |
| Year Ended 12/31/2019(f) | $12.63 | 10.11% | 0.32%(e) | 0.32%(e) | 1.98%(e) | 156% | $3 |
| Class 2 | |||||||
| Six Months Ended 6/30/2020 (Unaudited) | $12.58 | (0.16%) | 0.57%(e) | 0.57%(e) | (0.19%)(e) | 87% | $381,821 |
| Year Ended 12/31/2019 | $12.60 | 14.86% | 0.59% | 0.59% | 1.42% | 156% | $288,927 |
| Year Ended 12/31/2018 | $10.97 | (2.49%) | 0.65% | 0.65% | 0.99% | 51% | $139,061 |
| Year Ended 12/31/2017 | $11.25 | 11.72% | 0.74% | 0.67% | 0.80% | 49% | $82,636 |
| Year Ended 12/31/2016(g) | $10.07 | 0.70% | 1.08%(e) | 0.66%(e) | (0.28%)(e) | 10% | $18,272 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – U.S. Flexible Conservative Growth Fund | Semiannual Report 2020 | 15 |
Notes to Financial Statements
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Note 1. Organization
Variable Portfolio – U.S.
Flexible Conservative Growth Fund (the Fund), a series of Columbia Funds Variable Insurance Trust (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the
1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
The Fund is a
“fund-of-funds”, investing significantly in affiliated funds managed by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc.
(Ameriprise Financial), its affiliates, or third-party advised (unaffiliated) funds, including exchange-traded funds (collectively, Underlying Funds). The Fund is exposed to the same risks as the Underlying Funds in
direct proportion to the allocation of its assets among the Underlying Funds. For information on the investment strategies and risks of the Underlying Funds, please refer to the Fund’s current prospectus and the
prospectuses of the Underlying Funds, which are available, free of charge, from the Securities and Exchange Commission website at www.sec.gov.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1 and Class 2 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued by
affiliated life insurance companies (Participating Insurance Companies) and other qualified institutional investors (Qualified Investors) authorized by Columbia Management Investment Distributors, Inc. (the
Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by buying a Contract.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on any
exchange are valued at the mean between the closing bid and asked prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Asset- and mortgage-backed
securities are generally valued by pricing services, which utilize pricing models that incorporate the securities’ cash flow and loan performance data. These models also take into account available market data,
including trades, market quotations, and benchmark yield curves for identical or similar securities. Factors used to identify similar securities may include, but are not limited to, issuer, collateral type, vintage,
prepayment speeds, collateral performance, credit ratings, credit enhancement and expected life. Asset-backed securities for which quotations are readily available may also be valued based upon an over-the-counter or
exchange bid quote from an approved independent broker-dealer.
Investments in the Underlying Funds
(other than ETFs) are valued at the latest net asset value reported by those companies as of the valuation time.
Futures and options on futures
contracts are valued based upon the settlement price at the close of regular trading on their principal exchanges or, in the absence of transactions, at the mean of the latest quoted bid and ask prices.
| 16 | Variable Portfolio – U.S. Flexible Conservative Growth Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Option contracts are valued at the
mean of the latest quoted bid and ask prices on their primary exchanges. Option contracts, including over-the-counter option contracts, with no readily available market quotations are valued using mid-market
evaluations from independent third-party vendors.
Swap transactions are valued
through an independent pricing service or broker, or if neither is available, through an internal model based upon observable inputs.
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Foreign currency transactions and
translations
The values of all assets and
liabilities denominated in foreign currencies are generally translated into U.S. dollars at exchange rates determined at the close of regular trading on the New York Stock Exchange. Net realized and unrealized gains
(losses) on foreign currency transactions and translations include gains (losses) arising from the fluctuation in exchange rates between trade and settlement dates on securities transactions, gains (losses) arising
from the disposition of foreign currency and currency gains (losses) between the accrual and payment dates on dividends, interest income and foreign withholding taxes.
For financial statement purposes,
the Fund does not distinguish that portion of gains (losses) on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations
are included with the net realized and unrealized gains (losses) on investments in the Statement of Operations.
Derivative instruments
The Fund invests in certain
derivative instruments, as detailed below, to meet its investment objectives. Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more securities,
currencies, commodities, indices, or other assets or instruments. Derivatives may be used to increase investment flexibility (including to maintain cash reserves while maintaining desired exposure to certain assets),
for risk management (hedging) purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain investment risks,
such as foreign currency exchange rate risk, interest rate risk and credit risk. Derivatives may involve various risks, including the potential inability of the counterparty to fulfill its obligations under the terms
of the contract, the potential for an illiquid secondary market (making it difficult for the Fund to sell or terminate, including at favorable prices) and the potential for market movements which may expose the Fund
to gains or losses in excess of the amount shown in the Statement of Assets and Liabilities. The notional amounts of derivative instruments, if applicable, are not recorded in the financial statements.
A derivative instrument may suffer
a marked-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform its
obligations under the contract. The Fund’s risk of loss from counterparty credit risk on over-the-counter derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by
the Fund and the amount of any variation margin held by the counterparty, plus any replacement costs or related amounts. With exchange-traded or centrally cleared derivatives, there is reduced counterparty credit risk
to the Fund since the clearinghouse or central counterparty (CCP) provides some protection in the case of clearing member default. The clearinghouse or CCP stands between the buyer and the seller of the contract;
therefore, additional counterparty credit risk is failure of the clearinghouse or CCP. However, credit risk still exists in exchange-traded or centrally cleared derivatives with respect to initial and variation margin
that is held
| Variable Portfolio – U.S. Flexible Conservative Growth Fund | Semiannual Report 2020 | 17 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
in a broker’s customer account. While
brokers are required to segregate customer margin from their own assets, in the event that a broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin
held by the broker for all its clients, U.S. bankruptcy laws will typically allocate that shortfall on a pro-rata basis across all the broker’s customers (including the Fund), potentially resulting in losses to
the Fund.
In order to better define its
contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement)
or similar agreement with its derivatives contract counterparties. An ISDA Master Agreement is an agreement between the Fund and a counterparty that governs over-the-counter derivatives and typically contains, among
other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset with the counterparty
certain derivative instrument’s payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment
in the event of default (close-out netting), including the bankruptcy or insolvency of the counterparty. Note, however, that bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or
prohibitions against the right of offset or netting in bankruptcy, insolvency or other events.
Collateral (margin) requirements
differ by type of derivative. Margin requirements are established by the clearinghouse or CCP for exchange-traded and centrally cleared derivatives. Brokers can ask for margin in excess of the minimum in certain
circumstances. Collateral terms are contract specific for over-the-counter derivatives. For over-the-counter derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by
netting the marked-to-market amount for each transaction under such agreement and comparing that amount to the value of any variation margin currently pledged by the Fund and/or the counterparty. Generally, the amount
of collateral due from or to a party has to exceed a minimum transfer amount threshold (e.g., $250,000) before a transfer has to be made. To the extent amounts due to the Fund from its counterparties are not fully
collateralized, contractually or otherwise, the Fund bears the risk of loss from counterparty nonperformance. The Fund may also pay interest expense on cash collateral received from the broker. Any interest expense
paid by the Fund is shown on the Statement of Operations. The Fund attempts to mitigate counterparty risk by only entering into agreements with counterparties that it believes have the financial resources to honor
their obligations and by monitoring the financial stability of those counterparties.
Certain ISDA Master Agreements
allow counterparties of over-the-counter derivatives transactions to terminate derivatives contracts prior to maturity in the event the Fund’s net asset value declines by a stated percentage over a specified
time period or if the Fund fails to meet certain terms of the ISDA Master Agreement, which would cause the Fund to accelerate payment of any net liability owed to the counterparty. The Fund also has termination rights
if the counterparty fails to meet certain terms of the ISDA Master Agreement. In determining whether to exercise such termination rights, the Fund would consider, in addition to counterparty credit risk, whether
termination would result in a net liability owed from the counterparty.
For financial reporting purposes,
the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statement of Assets and Liabilities.
Futures contracts
Futures contracts are
exchange-traded and represent commitments for the future purchase or sale of an asset at a specified price on a specified date. The Fund bought and sold futures contracts to produce incremental earnings, to manage the
duration and yield curve exposure of the Fund versus the benchmark, to manage exposure to movements in interest rates, to manage exposure to the securities market and to maintain appropriate equity market exposure
while keeping sufficient cash to accommodate daily redemptions. These instruments may be used for other purposes in future periods. Upon entering into futures contracts, the Fund bears risks that it may not achieve
the anticipated benefits of the futures contracts and may realize a loss. Additional risks include counterparty credit risk, the possibility of an illiquid market, and that a change in the value of the contract or
option may not correlate with changes in the value of the underlying asset.
Upon entering into a futures
contract, the Fund deposits cash or securities with the broker, known as a futures commission merchant (FCM), in an amount sufficient to meet the initial margin requirement. The initial margin deposit must be
maintained at an established level over the life of the contract. Cash deposited as initial margin is recorded in the Statement of Assets and Liabilities as margin deposits. Securities deposited as initial margin are
designated in the Portfolio of Investments. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are
| 18 | Variable Portfolio – U.S. Flexible Conservative Growth Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
equal to the daily change in the contract value
and are recorded as variation margin receivable or payable and are offset in unrealized gains or losses. The Fund recognizes a realized gain or loss when the contract is closed or expires. Futures contracts involve,
to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities.
Options contracts
Options are contracts which entitle
the holder to purchase or sell securities or other identified assets at a specified price, or in the case of index option contracts, to receive or pay the difference between the index value and the strike price of the
index option contract. Option contracts can be either exchange-traded or over-the-counter. The Fund purchased option contracts to produce incremental earnings, to decrease the Fund’s exposure to equity market
risk and to increase return on investments and to facilitate buying and selling of securities for investments. These instruments may be used for other purposes in future periods. Completion of transactions for option
contracts traded in the over-the-counter market depends upon the performance of the other party. Cash collateral may be collected or posted by the Fund to secure certain over-the-counter option contract trades. Cash
collateral held or posted by the Fund for such option contract trades must be returned to the broker or the Fund upon closure, exercise or expiration of the contract.
Options contracts purchased are
recorded as investments. When the Fund writes an options contract, the premium received is recorded as an asset and an amount equivalent to the premium is recorded as a liability in the Statement of Assets and
Liabilities and is subsequently adjusted to reflect the current fair value of the option written. Changes in the fair value of the written option are recorded as unrealized appreciation or depreciation until the
contract is exercised or has expired. The Fund will realize a gain or loss when the option contract is closed or expires. When option contracts are exercised, the proceeds on sales for a written call or purchased put
option contract, or the purchase cost for a written put or purchased call option contract, is adjusted by the amount of premium received or paid.
For over-the-counter options
purchased, the Fund bears the risk of loss of the amount of the premiums paid plus the positive change in market values net of any collateral held by the Fund should the counterparty fail to perform under the
contracts. Option contracts written by the Fund do not typically give rise to significant counterparty credit risk, as options written generally obligate the Fund and not the counterparty to perform. The risk in
writing a call option contract is that the Fund gives up the opportunity for profit if the market price of the security increases above the strike price and the option contract is exercised. The risk in writing a put
option contract is that the Fund may incur a loss if the market price of the security decreases below the strike price and the option contract is exercised. Exercise of a written option could result in the Fund
purchasing or selling a security or foreign currency when it otherwise would not, or at a price different from the current market value. In purchasing and writing options, the Fund bears the risk of an unfavorable
change in the value of the underlying instrument or the risk that the Fund may not be able to enter into a closing transaction due to an illiquid market.
Swap contracts
Swap contracts are negotiated in
the over-the-counter market and may be entered into as a bilateral contract or centrally cleared (centrally cleared swap contract). In a centrally cleared swap contract, immediately following execution of the swap
contract with a broker, the swap contract is novated to a central counterparty (the CCP) and the CCP becomes the Fund’s counterparty to the centrally cleared swap contract. The Fund is required to deposit
initial margin with the futures commission merchant (FCM), which pledges it through to the CCP in the form of cash or securities in an amount that varies depending on the size and risk profile of the particular swap
contract. Securities deposited as initial margin are designated in the Portfolio of Investments and cash deposited is recorded in the Statement of Assets and Liabilities as margin deposits. Unlike a bilateral swap
contract, for centrally cleared swap contracts, the Fund has minimal credit exposure to the FCM because the CCP stands between the Fund and the relevant buyer/seller on the other side of the contract. Swap contracts
are marked-to-market daily and changes in value are recorded as unrealized appreciation (depreciation). The daily change in valuation of centrally cleared swap contracts, if any, is recorded as a receivable or payable
for variation margin in the Statement of Assets and Liabilities.
| Variable Portfolio – U.S. Flexible Conservative Growth Fund | Semiannual Report 2020 | 19 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Entering into these contracts
involves, to varying degrees, elements of interest, liquidity and counterparty credit risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that there
may be unfavorable changes in interest rates, market conditions or other conditions, that it may be difficult to initiate a swap transaction or liquidate a position at an advantageous time or price which may result in
significant losses, and that the FCM or CCP may not fulfill its obligation under the contract.
Credit default swap contracts
The Fund entered into credit
default swap contracts to increase or decrease its credit exposure to an index and to manage credit risk exposure. These instruments may be used for other purposes in future periods. Credit default swap contracts are
agreements in which one party pays fixed periodic payments to a counterparty in consideration for an agreement from the counterparty to make a specific payment should a specified credit event(s) take place. Although
specified credit events are contract specific, credit events are generally defined as bankruptcy, failure to pay, restructuring, obligation acceleration, obligation default, or repudiation/moratorium.
As the purchaser of a credit
default swap contract, the Fund purchases protection by paying a periodic interest rate on the notional amount to the counterparty. The interest amount is accrued daily as a component of unrealized appreciation
(depreciation) and is recorded as a realized loss upon payment. If a credit event as specified in the contract occurs, the Fund may have the option either to deliver the reference obligation to the seller in exchange
for a cash payment of its par amount, or to receive a net cash settlement equal to the par amount less an agreed-upon value of the reference obligation as of the date of the credit event. The difference between the
value of the obligation or cash delivered and the notional amount received will be recorded as a realized gain (loss).
As the seller of a credit default
swap contract, the Fund sells protection to a buyer and will generally receive a periodic interest rate on a notional amount. The interest amount is accrued daily as a component of unrealized appreciation
(depreciation) and is recorded as a realized gain upon receipt of the payment. If a credit event as specified in the contract with the counterparty occurs, the Fund may either be required to accept the reference
obligation from the buyer in exchange for a cash payment of its notional amount, or to pay the buyer a net cash settlement equal to the notional amount less an agreed-upon value of the reference obligation (recovery
value) as of the date of the credit event. The difference between the value of the obligation or cash received and the notional amount paid will be recorded as a realized gain (loss). The maximum potential amount of
undiscounted future payments the Fund could be required to make as the seller of protection under a credit default swap contract is equal to the notional amount of the reference obligation. These potential amounts may
be partially offset by any recovery values of the respective reference obligations or upfront receipts upon entering into the agreement. The notional amounts and market values of all credit default swap contracts in
which the Fund is the seller of protection, if any, are disclosed in the Credit Default Swap Contracts Outstanding schedule following the Portfolio of Investments.
As a protection seller, the Fund
bears the risk of loss from the credit events specified in the contract with the counterparty. For credit default swap contracts on credit indices, quoted market prices and resulting market values serve as an
indicator of the current status of the payment/performance risk. Increasing market values, in absolute terms when compared to the notional amount of the swap, represent a deterioration of the reference entity’s
credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the contract.
Any upfront payments or receipts by
the Fund upon entering into a credit default swap contract is recorded as an asset or liability, respectively, and amortized daily as a component of realized gain (loss) in the Statement of Operations. Credit default
swap contracts are valued daily, and the change in value is recorded as unrealized appreciation (depreciation) until the termination of the swap, at which time a realized gain (loss) is recorded.
Credit default swap contracts can
involve greater risks than if a fund had invested in the reference obligation directly since, in addition to general market risks, credit default swaps are subject to counterparty credit risk, leverage risk, hedging
risk, correlation risk and liquidity risk.
| 20 | Variable Portfolio – U.S. Flexible Conservative Growth Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Effects of derivative transactions in
the financial statements
The following tables are intended
to provide additional information about the effect of derivatives on the financial statements of the Fund, including: the fair value of derivatives by risk category and the location of those fair values in the
Statement of Assets and Liabilities; and the impact of derivative transactions over the period in the Statement of Operations, including realized and unrealized gains (losses). The derivative instrument schedules
following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any.
The following table is a summary of
the fair value of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) at June 30, 2020:
| Asset derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Credit risk | Component of trust capital — unrealized appreciation on swap contracts | 273,737* |
| Equity risk | Component of trust capital — unrealized appreciation on futures contracts | 261,921* |
| Equity risk | Investments, at value — Options Purchased | 2,571,720 |
| Interest rate risk | Component of trust capital — unrealized appreciation on futures contracts | 121,513* |
| Total | 3,228,891 |
| Liability derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Equity risk | Component of trust capital - unrealized depreciation on futures contracts | 1,445,378* |
| Interest rate risk | Component of trust capital - unrealized depreciation on futures contracts | 22,202* |
| Total | 1,467,580 |
| * | Includes cumulative appreciation (depreciation) as reported in the tables following the Portfolio of Investments. Only the current day’s variation margin is reported in receivables or payables in the Statement of Assets and Liabilities. |
The following table indicates the
effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) in the Statement of Operations for the six months ended June 30, 2020:
| Amount of realized gain (loss) on derivatives recognized in income | ||||
| Risk exposure category | Futures contracts ($) | Options contracts purchased ($) | Swap contracts ($) | Total ($) |
| Credit risk | — | — | 42,300 | 42,300 |
| Equity risk | (15,760,382) | 4,685,995 | — | (11,074,387) |
| Interest rate risk | 2,128,090 | — | — | 2,128,090 |
| Total | (13,632,292) | 4,685,995 | 42,300 | (8,903,997) |
| Change in unrealized appreciation (depreciation) on derivatives recognized in income | ||||
| Risk exposure category | Futures contracts ($) | Options contracts purchased ($) | Swap contracts ($) | Total ($) |
| Credit risk | — | — | 273,737 | 273,737 |
| Equity risk | (2,586,600) | 733,671 | — | (1,852,929) |
| Interest rate risk | 308,709 | — | — | 308,709 |
| Total | (2,277,891) | 733,671 | 273,737 | (1,270,483) |
| Variable Portfolio – U.S. Flexible Conservative Growth Fund | Semiannual Report 2020 | 21 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
The following table is a summary
of the average outstanding volume by derivative instrument for the six months ended June 30, 2020:
| Derivative instrument | Average notional amounts ($)* |
| Futures contracts — long | 89,063,798 |
| Futures contracts — short | 52,598,757 |
| Credit default swap contracts — sell protection | 16,000,000 |
| Derivative instrument | Average value ($)* |
| Options contracts — purchased | 2,407,898 |
| * | Based on the ending quarterly outstanding amounts for the six months ended June 30, 2020. |
Asset- and mortgage-backed
securities
The Fund may invest in asset-backed
and mortgage-backed securities. The maturity dates shown represent the original maturity of the underlying obligation. Actual maturity may vary based upon prepayment activity on these obligations. All, or a portion,
of the obligation may be prepaid at any time because the underlying asset may be prepaid. As a result, decreasing market interest rates could result in an increased level of prepayment. An increased prepayment rate
will have the effect of shortening the maturity of the security. Unless otherwise noted, the coupon rates presented are fixed rates.
Delayed delivery securities
The Fund may trade securities on
other than normal settlement terms, including securities purchased or sold on a “when-issued” or "forward commitment" basis. This may increase risk to the Fund since the other party to the transaction may
fail to deliver, which could cause the Fund to subsequently invest at less advantageous prices. The Fund designates cash or liquid securities in an amount equal to the delayed delivery commitment.
To be announced securities
The Fund may trade securities on a
To Be Announced (TBA) basis. As with other delayed-delivery transactions, a seller agrees to issue a TBA security at a future date. However, the seller does not specify the particular securities to be delivered.
Instead, the Fund agrees to accept any security that meets specified terms.
In some cases, Master Securities
Forward Transaction Agreements (MSFTAs) may be used to govern transactions of certain forward-settling agency mortgage-backed securities, such as delayed-delivery and TBAs, between the Fund and counterparty. The MSFTA
maintains provisions for, among other things, initiation and confirmation, payment and transfer, events of default, termination, and maintenance of collateral relating to such transactions.
Mortgage dollar roll transactions
The Fund may enter into mortgage
“dollar rolls” in which the Fund sells securities for delivery in the current month and simultaneously contracts with the same counterparty to repurchase similar but not identical securities (same type,
coupon and maturity) on a specified future date. During the roll period, the Fund loses the right to receive principal and interest paid on the securities sold. However, the Fund will benefit because it receives
negotiated amounts in the form of reductions of the purchase price for the future purchase plus the interest earned on the cash proceeds of the securities sold until the settlement date of the forward purchase. The
Fund records the incremental difference between the forward purchase and sale of each forward roll as a realized gain or loss. Unless any realized gains exceed the income, capital appreciation, and gain or loss due to
mortgage prepayments that would have been realized on the securities sold as part of the mortgage dollar roll, the use of this technique will diminish the investment performance of the Fund compared to what the
performance would have been without the use of mortgage dollar rolls. All cash proceeds will be invested in instruments that are permissible investments for the Fund. The Fund identifies cash or liquid securities in
an amount equal to the forward purchase price.
| 22 | Variable Portfolio – U.S. Flexible Conservative Growth Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
For financial reporting and tax
purposes, the Fund treats “to be announced” mortgage dollar rolls as two separate transactions, one involving the purchase of a security and a separate transaction involving a sale. These transactions may
increase the Fund’s portfolio turnover rate. The Fund does not currently enter into mortgage dollar rolls that are accounted for as financing transactions.
Mortgage dollar rolls involve the
risk that the market value of the securities the Fund is obligated to repurchase may decline below the repurchase price, or that the counterparty may default on its obligations.
Offsetting of assets and
liabilities
The following table presents the
Fund’s gross and net amount of assets and liabilities available for offset under netting arrangements as well as any related collateral received or pledged by the Fund as of June 30, 2020:
| JPMorgan ($) | Morgan Stanley ($) | Total ($) | |
| Assets | |||
| Centrally cleared credit default swap contracts (a) | - | 25,039 | 25,039 |
| Options purchased puts | 2,571,720 | - | 2,571,720 |
| Total assets | 2,571,720 | 25,039 | 2,596,759 |
| Total financial and derivative net assets | 2,571,720 | 25,039 | 2,596,759 |
| Total collateral received (pledged) (b) | - | - | - |
| Net amount (c) | 2,571,720 | 25,039 | 2,596,759 |
| (a) | Centrally cleared swaps are included within payable/receivable for variation margin on the Statement of Assets and Liabilities. |
| (b) | In some instances, the actual collateral received and/or pledged may be more than the amount shown due to overcollateralization. |
| (c) | Represents the net amount due from/(to) counterparties in the event of default. |
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Interest income is recorded on an
accrual basis. Market premiums and discounts, including original issue discounts, are amortized and accreted, respectively, over the expected life of the security on all debt securities, unless otherwise noted. The
Fund classifies gains and losses realized on prepayments received on mortgage-backed securities as adjustments to interest income.
The Fund may place a debt security
on non-accrual status and reduce related interest income when it becomes probable that the interest will not be collected and the amount of uncollectible interest can be reasonably estimated. A defaulted debt security
is removed from non-accrual status when the issuer resumes interest payments or when collectibility of interest is reasonably assured.
Corporate actions and dividend
income are recorded on the ex-dividend date.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a
proportionate change in return of capital to shareholders.
| Variable Portfolio – U.S. Flexible Conservative Growth Fund | Semiannual Report 2020 | 23 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
Income and capital gain
distributions from the Underlying Funds, if any, are recorded on the ex-dividend date.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund is treated as a
partnership for federal income tax purposes, and the Fund does not expect to make regular distributions. The Fund will not be subject to federal income tax, and therefore, there is no provision for federal income
taxes. The partners of the Fund are subject to tax on their distributive share of the Fund’s income and loss. The components of the Fund’s net assets are reported at the partner-level for federal income
tax purposes, and therefore, are not presented in the Statement of Assets and Liabilities.
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees and
underlying fund fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager). Under the Management Agreement, the Investment Manager provides the Fund with investment research and advice, as well as
administrative and accounting services. The management services fee is an annual fee that is a blend of (i) 0.02% on assets invested in affiliated underlying funds (including exchange-traded funds and closed-end
funds) that pay a management services fee (or investment advisory services fee, as applicable) to the Investment Manager and (ii) a fee that declines from 0.72% to 0.52%, depending on asset levels, on assets
invested in securities (other than affiliated underlying funds (including exchange-traded funds and closed-end funds) that pay a management services fee (or investment advisory services fee, as applicable) to the
Investment Manager) including other funds advised by the Investment Manager that do not pay a management services fee to the Investment Manager, third party funds, derivatives and individual securities. The annualized
effective management services fee rate for the six months ended June 30, 2020 was 0.22% of the Fund’s average daily net assets.
| 24 | Variable Portfolio – U.S. Flexible Conservative Growth Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
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 expense and fee
levels and the Fund may own different proportions of Underlying Funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. These expenses are not reflected in the expenses
shown in Statement of Operations and are not included in the ratios to average net assets shown in the Financial Highlights.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. These members of the Board of Trustees
may participate in a Deferred Compensation Plan (the Deferred Plan) which may be terminated at any time. Obligations of the Deferred Plan will be paid solely out of the Fund’s assets, and all amounts payable
under the Deferred Plan constitute a general unsecured obligation of the Fund.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The annualized
effective service fee rate for the six months ended June 30, 2020, was 0.06% of the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. The Board of Trustees has approved, and the Fund has adopted, a distribution plan
(the Plan) which sets the distribution fees for the Fund. These fees are calculated daily and are intended to compensate the Distributor for selling shares of the Fund. The Fund pays a monthly distribution fee to the
Distributor at the maximum annual rate of 0.25% of the average daily net assets attributable to Class 2 shares of the Fund. The Fund pays no distribution and service fees for Class 1 shares.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, including indirect expenses of the Underlying Funds, after giving effect to fees waived/expenses reimbursed and any balance credits
and/or overdraft charges from the Fund’s custodian, do not exceed the following annual rate(s) as a percentage of the class’ average daily net assets:
| May 1, 2020 through April 30, 2021 | Prior to May 1, 2020 | |
| Class 1 | 0.80% | 0.85% |
| Class 2 | 1.05 | 1.10 |
| Variable Portfolio – U.S. Flexible Conservative Growth Fund | Semiannual Report 2020 | 25 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), transaction costs and brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program
fees and expenses, transaction charges and interest on borrowed money, interest, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This
agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements
described above are not recoverable by the Investment Manager or its affiliates in future periods.
Note 4. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $403,591,163 and $260,455,058, respectively, for the six months ended June 30, 2020, of which $306,119,973 and
$239,003,216, respectively, were U.S. government securities. The amount of purchase and sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 5. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes referred to
as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 6. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund did not borrow or lend
money under the Interfund Program during the six months ended June 30, 2020.
Note 7. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by Citibank, N.A., HSBC Bank USA, N.A. and JPMorgan Chase Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. The credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment Manager or an affiliated investment manager, severally and
not jointly, permits collective borrowings up to $1 billion. Interest is charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the
one-month LIBOR rate and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a
commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The commitment fee is included in other expenses in the Statement of Operations. This agreement
expires annually in December unless extended or renewed.
The Fund had no borrowings during
the six months ended June 30, 2020.
| 26 | Variable Portfolio – U.S. Flexible Conservative Growth Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Note 8. Significant
risks
Derivatives risk
Losses involving derivative
instruments may be substantial, because a relatively small movement in the underlying reference (which is generally the price, rate or other economic indicator associated with a security(ies), commodity, currency or
index or other instrument or asset) may result in a substantial loss for the Fund. In addition to the potential for increased losses, the use of derivative instruments may lead to increased volatility within the Fund.
Derivatives will typically increase the Fund’s exposure to principal risks to which it is otherwise exposed, and may expose the Fund to additional risks, including correlation risk, counterparty risk, hedging
risk, leverage risk, liquidity risk and pricing risk.
Market and environment risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The Fund performance may also be
significantly negatively impacted by the economic impact of the coronavirus disease 2019 (COVID-19) pandemic. Public health crisis has become a pandemic that has resulted in, and may continue to result in, significant
global economic and societal disruption and market volatility due to disruptions in market access, resource availability, facilities operations, imposition of tariffs, export controls and supply chain disruption,
among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement and loss in human and other resources. The uncertainty surrounding the magnitude, duration,
reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as
the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and pandemics that may arise in the future – could negatively affect global economies and markets
in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in emerging market countries may be greater due to generally less established healthcare systems,
governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The disruptions caused
by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively impact the Fund’s ability to achieve their investment objectives. Any such event(s) could
have a significant adverse impact on the value and risk profile of the Fund.
The Investment Manager and its
affiliates have systematically implemented strategies to address the operating environment spurred by the COVID-19 pandemic. To promote the safety and security of our employees and to assure the continuity of our
business operations, we have implemented a work from home protocol for virtually all of our employee population, restricted business travel, and provided resources for complying with the guidance from the World Health
Organization, the U.S. Centers for Disease Control and governments. Our operations teams seek to operate without significant disruptions in service. Our pandemic strategy takes into consideration that a pandemic could
be widespread and may occur in multiple waves, affecting different communities at different times with varying levels of severity. We cannot, however, predict the impact that natural or man-made disasters, including
the COVID-19 pandemic, may have on the ability of our employees and third-party service providers to continue ordinary business operations and technology functions over near- or longer-term periods.
| Variable Portfolio – U.S. Flexible Conservative Growth Fund | Semiannual Report 2020 | 27 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Shareholder concentration risk
At June 30, 2020, affiliated
shareholders of record owned 100.0% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 9. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 10. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial.
| 28 | Variable Portfolio – U.S. Flexible Conservative Growth Fund | Semiannual Report 2020 |
Liquidity Risk
Management Program
Pursuant to Rule 22e-4 under the
1940 Act, the Fund has adopted a liquidity risk management program (Program). The Program’s principal objectives include assessing, managing and periodically reviewing the Fund’s liquidity risk. Liquidity
risk is defined as the risk that the Fund could not meet redemption requests without significant dilution of remaining investors’ interests in the Fund.
The Board has appointed the
Investment Manager as the program administrator for the Fund’s Program. The Investment Manager has delegated oversight of the Program to its Liquidity Risk Management Committee (the Committee). At a board
meeting during the fiscal period, the Committee provided the Board with a report addressing the operations of the program and assessing its adequacy and effectiveness of implementation for the period December 1, 2018,
through December 31, 2019, including:
| • | the Fund had sufficient liquidity to both meet redemptions and operate effectively on behalf of shareholders; |
| • | there were no material changes to the Program during the period; |
| • | the implementation of the Program was effective to manage the Fund’s liquidity risk; and |
| • | the Program operated adequately during the period. |
There can be no assurance that the
Program will achieve its objectives in the future. Please refer to the Fund’s prospectus for more information regarding the Fund’s exposure to liquidity risk and other principal risks to which an
investment in the Fund may be subject.
Board Consideration
and Approval of Management
Agreement
On June 17, 2020, the Board of
Trustees (the Board) and the Trustees who are not interested persons (as defined in the Investment Company Act of 1940) (the Independent Trustees) of Columbia Funds Variable Insurance Trust (the Trust) unanimously
approved the continuation of the Management Agreement (the Management Agreement) with Columbia Management Investment Advisers, LLC (the Investment Manager) with respect to Variable Portfolio – U.S. Flexible
Conservative Growth Fund (the Fund), a series of the Trust. As detailed below, the Board’s Advisory Fees and Expenses Committee (the Committee) and the Board met on multiple occasions to review and discuss,
among themselves, with the management team of the Investment Manager and with an independent fee consultant, materials provided by the Investment Manager, the independent fee consultant and others before determining
to approve the continuation of the Management Agreement.
In connection with their
deliberations regarding the continuation of the Management Agreement, the Committee and the Board evaluated materials requested from the Investment Manager regarding the Fund and the Management Agreement, and
discussed these materials with representatives of the Investment Manager at Committee meetings held on March 10, 2020, April 30, 2020 and June 17, 2020 and at Board meetings held on March 11, 2020 and June 17, 2020.
In addition, the Board and its various committees consider matters bearing on the Management Agreement at other meetings throughout the year and in prior years and meet regularly with senior management of the Trust
and the Investment Manager. Through the Board’s Investment Oversight Committees, Trustees also meet with selected portfolio managers of the funds the Trustees oversee and with other investment personnel at
various times throughout the year. The Committee and the Board also consulted with the independent fee consultant, Fund counsel and the Independent Trustees’ independent legal counsel, who advised on various
matters with respect to the Committee’s and the Board’s considerations and otherwise assisted the Committee and the Board in their deliberations. On June 17, 2020, the Committee recommended that the Board
approve the continuation of the Management Agreement. On June 17, 2020, the Board, including the Independent Trustees, voting separately, unanimously approved the continuation of the Management Agreement for the
Fund.
| Variable Portfolio – U.S. Flexible Conservative Growth Fund | Semiannual Report 2020 | 29 |
Board Consideration and Approval of
Management
Agreement (continued)
The Committee and the Board considered all
information that they, their legal counsel or the Investment Manager believed reasonably necessary to evaluate and to determine whether to recommend for approval or approve the continuation of the Management
Agreement. The information and factors considered by the Committee and the Board in recommending for approval or approving the continuation of the Management Agreement for the Fund included the following:
| • | Information on the investment performance of the Fund relative to the performance of a group of mutual funds determined to be comparable to the Fund by the Investment Manager, as well as performance relative to benchmarks; |
| • | Information on the Fund’s management fees and total expenses, including information comparing the Fund’s expenses to those of a group of comparable mutual funds, as determined by the Investment Manager; |
| • | The Investment Manager’s agreement to contractually limit or cap total operating expenses for the Fund through April 30, 2021 so that total operating expenses (excluding certain fees and expenses, such as transaction costs and certain other investment related expenses, interest, taxes, and infrequent and/or unusual expenses) would not exceed a specified annual rate, as a percentage of the Fund’s net assets; |
| • | The terms and conditions of the Management Agreement; |
| • | The current and proposed terms and conditions of other agreements and arrangements with affiliates of the Investment Manager relating to the operations of the Fund, including agreements with respect to the provision of distribution, transfer agency and shareholder services to the Fund; |
| • | Descriptions of various functions performed by the Investment Manager under the Management Agreement, including portfolio management and portfolio trading practices; |
| • | Information regarding any recently negotiated management fees of similarly-managed portfolios of other institutional clients of the Investment Manager; |
| • | Information regarding the reputation, regulatory history and resources of the Investment Manager, including information regarding senior management, portfolio managers and other personnel; |
| • | Information regarding the capabilities of the Investment Manager with respect to compliance monitoring services, including an assessment of the Investment Manager’s compliance system by the Fund’s Chief Compliance Officer; and |
| • | The profitability to the Investment Manager and its affiliates from their relationships with the Fund. |
Nature, extent and quality of
services provided under the Management Agreement
The Committee and the Board
considered the nature, extent and quality of services provided to the Fund by the Investment Manager and its affiliates under the Management Agreement and under separate agreements for the provision of transfer agency
and shareholder services, and the resources dedicated to the Fund and the other Columbia Funds by the Investment Manager and its affiliates. The Committee and the Board considered, among other things, the Investment
Manager’s ability to attract, motivate and retain highly qualified research, advisory and supervisory investment professionals (including compensation programs for personnel involved in fund management,
reputation and other attributes), the portfolio management services provided by those investment professionals, and the quality of the Investment Manager’s investment research capabilities and trade execution
services. The Committee and the Board also considered the potential benefits to shareholders of investing in a mutual fund that is part of a fund complex offering exposure to a variety of asset classes and investment
disciplines and providing a variety of fund and shareholder services.
The Committee and the Board also
considered the professional experience and qualifications of the senior personnel of the Investment Manager, which included consideration of the Investment Manager’s experience with funds using an investment
strategy similar to that used by the Investment Manager for the Fund. The Committee and the Board noted the compliance programs of and the compliance-related resources provided to the Fund by the Investment Manager
and its affiliates and the resources dedicated by the Investment Manager and its affiliates to risk management, and considered the Investment Manager’s ability to provide administrative services to the Fund and
coordinate the activities of the Fund’s other service
| 30 | Variable Portfolio – U.S. Flexible Conservative Growth Fund | Semiannual Report 2020 |
Board Consideration and Approval of
Management
Agreement (continued)
providers. After reviewing these and related
factors, the Committee and the Board concluded, within the context of their overall conclusions, that the nature, extent and quality of the services provided to the Fund under the Management Agreement supported the
continuation of the Management Agreement.
Investment performance
The Committee and the Board
reviewed information about the performance of the Fund over various time periods, including performance information relative to benchmarks, information that compared the performance of the Fund to the performance of a
group of comparable mutual funds as determined by the Investment Manager, and information and analysis provided by the independent fee consultant. The Committee and the Board also reviewed a description of the
Investment Manager’s methodology for identifying the Fund’s peer groups for purposes of performance and expense comparisons.
The Committee and the Board noted
that, through December 31, 2019, the Fund’s performance was in the twenty-first and sixth percentile (where the best performance would be in the first percentile) of its category selected by the Investment
Manager for the purposes of performance comparisons for the one- and three-year periods, respectively.
The Committee and the Board also
considered the Investment Manager’s performance and reputation generally, the Investment Manager’s historical responsiveness to Board concerns about performance, and the Investment Manager’s
willingness to take steps intended to improve performance. After reviewing these and related factors, the Committee and the Board concluded, within the context of their overall conclusions, that the performance of the
Fund and the Investment Manager was sufficient, in light of other considerations, to support the continuation of the Management Agreement.
Investment management fee rates
and other expenses
The Committee and the Board
considered the management fees charged to the Fund under the Management Agreement as well as the total expenses incurred by the Fund. In assessing the reasonableness of the fees under the Management Agreement, the
Committee and the Board considered, among other information, the Fund’s total expense ratio as a percentage of average daily net assets. The Committee and the Board considered data provided by the Investment
Manager and the independent fee consultant. The Committee and the Board noted that, as of December 31, 2019, the Fund’s actual management fee and net total expense ratio were both ranked in the third quintile
(where the lowest fees and expenses would be in the first quintile) against the Fund’s expense universe as determined by the Investment Manager for purposes of expense comparison. The Committee and the Board
also took into account the fee waiver and expense limitation arrangements agreed to by the Investment Manager, as noted above.
The Committee and the Board also
received and considered information about the management fees charged by the Investment Manager to institutional accounts. In considering the fees charged to those accounts, the Committee and the Board took into
account, among other things, the Investment Manager’s representations about the differences between managing mutual funds as compared to other types of accounts, including differences in the services provided,
differences in the risk profile of such business for the Investment Manager and the additional resources required to manage mutual funds effectively. The Committee and the Board also received and considered
information about the fees charged by the Investment Manager for sub-advisory services it provides to comparable unaffiliated funds. In evaluating the Fund’s management fees, the Committee and the Board also
took into account the demands, complexity and quality of the investment management of the Fund.
After reviewing these and related
factors, the Committee and the Board concluded, within the context of their overall conclusions, that the management fee rates and expenses of the Fund, in light of other considerations, supported the continuation of
the Management Agreement.
Costs of services provided and
profitability
The Committee and the Board also
took note of the costs the Investment Manager and its affiliates incur in connection with the services provided and the profitability to the Investment Manager and its affiliates from their relationships with the
Fund, and the efforts undertaken by the Investment Manager and its affiliates to manage efficiently their costs to provide such services.
| Variable Portfolio – U.S. Flexible Conservative Growth Fund | Semiannual Report 2020 | 31 |
Board Consideration and Approval of
Management
Agreement (continued)
The Committee and the Board also considered the
compensation directly or indirectly received by the Investment Manager’s affiliates in connection with their relationships with the Fund. The Committee and the Board reviewed information provided by management
as to the profitability to the Investment Manager and its affiliates of their relationships with the Fund, information about the allocation of expenses used to calculate profitability, and comparisons of profitability
levels realized in 2019 to profitability levels realized in 2018. When reviewing profitability, the Committee and the Board also considered court cases in which adviser profitability was an issue in whole or in part,
the performance of similarly managed funds, the performance of the Fund, and the expense ratio of the Fund. In addition, the Committee and the Board considered information provided by the Investment Manager regarding
the Investment Manager’s financial condition and comparing its profitability to that of other asset management firms that are, or are subsidiaries of, publicly traded companies. In this regard, the Committee and
the Board also considered data provided by the independent fee consultant.
After reviewing these and related
factors, the Committee and the Board concluded, within the context of their overall conclusions, that the costs of services provided and the profitability to the Investment Manager and its affiliates from their
relationships with the Fund supported the continuation of the Management Agreement.
Economies of scale
The Committee and the Board
considered the potential existence of economies of scale in the provision by the Investment Manager of services to the Fund, to groups of related funds, and to the Investment Manager’s investment advisory
clients as a whole, and whether those economies of scale were shared with the Fund through breakpoints in investment management fees or other means, such as expense limitation arrangements and additional investments
by the Investment Manager in investment, trading, compliance and other resources. The Committee and the Board noted that the management fee schedules for the Fund contained breakpoints that would reduce the fee rate
on assets above specified threshold levels.
In considering these matters, the
Committee and the Board also considered the costs of the services provided and the profitability to the Investment Manager and its affiliates from their relationships with the Fund, as noted above. After reviewing
these and related factors, the Committee and the Board concluded, within the context of their overall conclusions, that the extent to which any economies of scale were expected to be shared with the Fund supported the
continuation of the Management Agreement.
Other benefits to the Investment
Manager
The Committee and the Board
received and considered information regarding “fall-out” or ancillary benefits received by the Investment Manager and its affiliates as a result of their relationships with the Fund, such as the engagement
of the Investment Manager’s affiliates to provide distribution, transfer agency and shareholder services to the Fund. In this regard, among other matters, the Committee and the Board considered that the
Fund’s distributor retains a portion of the distribution fees from the Fund. The Committee and the Board also considered the benefits of research made available to the Investment Manager by reason of brokerage
commissions generated by the Fund’s securities transactions, and reviewed information about the Investment Manager’s practices with respect to considering brokerage and research services when allocating
portfolio transactions. In this connection, the Board also noted that the amount of research made available to the Investment Manager by reason of brokerage commissions had been declining over time, and may decline
further. The Committee and the Board also considered the tax benefits provided to affiliates of the Investment Manager as a result of the election by certain Funds to be taxed as partnerships. The Committee and the
Board recognized that the Investment Manager’s profitability would be somewhat lower without these benefits.
Conclusion
The Committee and the Board
reviewed all of the above considerations in reaching their decisions to recommend or approve the continuation of the Management Agreement. In their deliberations, the Trustees did not identify any particular
information that was all-important or controlling, and individual Trustees may have attributed different weights to the various factors. Based on their evaluation of all factors that they deemed to be material,
including those factors described above, and assisted by the advice of independent legal counsel, the Board, including the Independent Trustees, voting separately, unanimously approved the continuation of the
Management Agreement.
| 32 | Variable Portfolio – U.S. Flexible Conservative Growth Fund | Semiannual Report 2020 |
Results of Meeting of
Shareholders
At a Joint Special Meeting of
Shareholders held on April 16, 2020, shareholders of Columbia Funds Variable Insurance Trust elected each of the ten nominees for the trustees to the Board of Trustees of Columbia Funds Variable Insurance Trust, each
to hold office until he or she dies, resigns or is removed or, if sooner, until the next meeting of shareholders called for the purpose of electing trustees and until the election and qualification of his or her
successor, as follows:
| Trustee | Votes For | Votes Withheld | Abstentions |
| Janet L. Carrig | 26,231,108,809 | 1,129,334,152 | 0 |
| J. Kevin Connaughton | 26,249,644,638 | 1,110,798,323 | 0 |
| Olive Darragh | 26,323,990,658 | 1,036,452,304 | 0 |
| Douglas A. Hacker | 26,255,762,920 | 1,104,680,042 | 0 |
| Nancy T. Lukitsh | 26,332,381,722 | 1,028,061,240 | 0 |
| David M. Moffett | 26,252,719,395 | 1,107,723,567 | 0 |
| John J. Neuhauser | 26,222,694,456 | 1,137,748,505 | 0 |
| Christopher O. Petersen | 26,265,703,212 | 1,094,739,749 | 0 |
| Patrick J. Simpson | 26,222,908,024 | 1,137,534,938 | 0 |
| Natalie A. Trunow | 26,340,164,732 | 1,020,278,229 | 0 |
| Variable Portfolio – U.S. Flexible Conservative Growth Fund | Semiannual Report 2020 | 33 |
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BLANK]
[THIS PAGE INTENTIONALLY LEFT BLANK]
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 225 Franklin Street, Boston, MA
02110-2804
© 2020 Columbia Management Investment
Advisers, LLC.
S-2026 AP (8/20)
Variable Portfolio
– U.S. Flexible Growth Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
| 3 | |
| 5 | |
| 6 | |
| 10 | |
| 11 | |
| 12 | |
| 14 | |
| 16 | |
| 30 | |
| 30 | |
| 34 |
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which Variable Portfolio – U.S. Flexible Growth Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional Information
(SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov. Information
regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge by visiting
columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT, and for reporting periods ended prior to March 31, 2019, on Form N-Q. The Fund’s Form N-Q and Form N-PORT
filings are available on the SEC’s website at sec.gov. The Fund’s complete schedule of portfolio holdings, as filed on Form N-Q or Form N-PORT, can also be obtained without charge, upon request, by calling
800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
225 Franklin Street
Boston, MA 02110
Fund distributor
Columbia Management Investment Distributors,
Inc.
225 Franklin Street
Boston, MA 02110
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Variable Portfolio – U.S. Flexible Growth
Fund | Semiannual Report 2020
Fund at a Glance
(Unaudited)
(Unaudited)
Investment objective
The Fund
pursues total return while seeking to manage the Fund’s exposure to equity market volatility.
Portfolio management
Brian Virginia
Lead Portfolio Manager
Managed Fund since 2016
Anwiti Bahuguna, Ph.D.
Portfolio Manager
Managed Fund since 2016
David Weiss, CFA
Portfolio Manager
Managed Fund since 2016
Joshua Kutin, CFA
Portfolio Manager
Managed Fund since 2018
| Variable Portfolio – U.S. Flexible Growth Fund | Semiannual Report 2020 | 3 |
Fund at a Glance (continued)
(Unaudited)
(Unaudited)
| Portfolio Allocation (%) (at June 30, 2020) | |
| Allocations to Underlying Funds | |
| Equity Funds | 47.5 |
| U.S. Large Cap | 47.5 |
| Exchange-Traded Fixed Income Funds | 7.7 |
| Investment Grade | 7.7 |
| Fixed Income Funds | 10.2 |
| High Yield | 0.6 |
| Investment Grade | 9.6 |
| Allocations to Tactical Assets | |
| Money Market Fund Shares Held to Cover Open Derivatives Instruments(a) | 11.7 |
| Options Purchased Puts | 0.8 |
| Residential Mortgage-Backed Securities - Agency | 22.1 |
| Total | 100.0 |
| (a) | Includes investments in Money Market Funds (amounting to $476.4 million) which have been segregated to cover obligations relating to the Fund’s investment in derivatives as part of its tactical allocation strategy. For a description of the Fund’s investments in derivatives, see Investments in derivatives following the Portfolio of Investments and Note 2 to the Notes to Financial Statements. |
Percentages indicated are based upon
total investments including options purchased and excluding all other investments in derivatives, if any. The Fund’s portfolio composition is subject to change.
| 4 | Variable Portfolio – U.S. Flexible Growth Fund | Semiannual Report 2020 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount 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 results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
In addition to the ongoing expenses
which the Fund bears directly, the Fund’s shareholders indirectly bear the Fund’s allocable share of the costs and expenses of each underlying fund in which the Fund invests. You can also estimate the
effective expenses paid during the period, which includes the indirect fees associated with investing in the underlying funds, by using the amounts listed in the "Effective expenses paid during the period" column.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
| January 1, 2020 — June 30, 2020 | ||||||||||
| Account value at the beginning of the period ($) | Account value at the end of the period ($) | Expenses paid during the period ($) | Fund’s annualized expense ratio (%) | Effective expenses paid during the period ($) | Fund’s effective annualized expense ratio (%) | |||||
| Actual | Hypothetical | Actual | Hypothetical | Actual | Hypothetical | Actual | Actual | Hypothetical | Actual | |
| Class 1 | 1,000.00 | 1,000.00 | 961.20 | 1,023.42 | 1.41 | 1.46 | 0.29 | 3.46 | 3.57 | 0.71 |
| Class 2 | 1,000.00 | 1,000.00 | 960.40 | 1,022.23 | 2.58 | 2.66 | 0.53 | 4.63 | 4.78 | 0.95 |
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 366.
Effective expenses paid during the
period and the Fund’s effective annualized expense ratio include expenses borne directly to the class plus the Fund’s pro rata portion of the ongoing expenses charged by the underlying funds using the
expense ratio of each class of the underlying funds as of the underlying fund’s most recent shareholder report.
| Variable Portfolio – U.S. Flexible Growth Fund | Semiannual Report 2020 | 5 |
Portfolio of Investments
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
(Percentages represent value of
investments compared to net assets)
Investments in securities
At June 30, 2020,
securities and/or cash totaling $120,816,469 were pledged as collateral.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 6 | Variable Portfolio – U.S. Flexible Growth Fund | Semiannual Report 2020 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Investments in derivatives
| Long futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| S&P 500 Index E-mini | 817 | 09/2020 | USD | 126,234,670 | 3,583,401 | — |
| U.S. Long Bond | 1,058 | 09/2020 | USD | 188,919,125 | 351,609 | — |
| U.S. Treasury 10-Year Note | 1,859 | 09/2020 | USD | 258,720,516 | 678,883 | — |
| U.S. Treasury 2-Year Note | 1,100 | 09/2020 | USD | 242,910,939 | 26,438 | — |
| U.S. Treasury 5-Year Note | 2,353 | 09/2020 | USD | 295,871,368 | 638,585 | — |
| U.S. Ultra Treasury Bond | 304 | 09/2020 | USD | 66,319,500 | — | (249,983) |
| Total | 5,278,916 | (249,983) | ||||
| Short futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| S&P 500 Index E-mini | (6,837) | 09/2020 | USD | (1,056,384,870) | — | (23,759,648) |
| S&P/TSX 60 Index | (210) | 09/2020 | CAD | (38,997,000) | — | (874,821) |
| Total | — | (24,634,469) | ||||
| Put option contracts purchased | ||||||||
| Description | Counterparty | Trading currency | Notional amount | Number of contracts | Exercise price/Rate | Expiration date | Cost ($) | Value ($) |
| S&P 500 Index | JPMorgan | USD | 215,470,155 | 695 | 2,600.00 | 12/17/2021 | 11,971,503 | 15,686,150 |
| S&P 500 Index | JPMorgan | USD | 217,020,300 | 700 | 2,400.00 | 12/17/2021 | 13,058,997 | 11,158,000 |
| S&P 500 Index | JPMorgan | USD | 124,011,600 | 400 | 2,500.00 | 12/17/2021 | 6,747,360 | 7,340,000 |
| Total | 31,777,860 | 34,184,150 | ||||||
| Cleared credit default swap contracts - sell protection | ||||||||||||
| Reference entity | Counterparty | Maturity date | Receive fixed rate (%) | Payment frequency | Implied credit spread (%)* | Notional currency | Notional amount | Value ($) | Upfront payments ($) | Upfront receipts ($) | Unrealized appreciation ($) | Unrealized depreciation ($) |
| Markit CDX North America Investment Grade Index, Series 34 | Morgan Stanley | 06/20/2025 | 1.000 | Quarterly | 0.762 | USD | 295,000,000 | 4,113,279 | — | — | 4,113,279 | — |
| * | Implied credit spreads, represented in absolute terms, utilized in determining the market value of credit default swap agreements on corporate or sovereign issues as of period end serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement. |
Notes to Portfolio of
Investments
| (a) | As defined in the Investment Company Act of 1940, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the period ended June 30, 2020 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Capital gain distributions($) | Realized gain (loss)($) | Dividends — affiliated issuers ($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.253% | |||||||||
| 673,395,132 | 1,259,007,322 | (1,456,028,772) | 56,368 | 476,430,050 | — | 11,815 | 3,032,610 | 476,430,050 | |
| Columbia Variable Portfolio – Disciplined Core Fund, Class 1 Shares | |||||||||
| 196,936,969 | 27,592,280 | (8,453,328) | (1,626,288) | 214,449,633 | — | (241,530) | — | 3,768,886 | |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – U.S. Flexible Growth Fund | Semiannual Report 2020 | 7 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Notes
to Portfolio of Investments (continued)
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Capital gain distributions($) | Realized gain (loss)($) | Dividends — affiliated issuers ($) | End of period shares |
| Columbia Variable Portfolio – Income Opportunities Fund, Class 1 Shares | |||||||||
| 22,477,582 | 2,868,582 | (425,295) | (849,209) | 24,071,660 | — | (33,816) | — | 3,283,992 | |
| Columbia Variable Portfolio – Intermediate Bond Fund, Class 1 Shares | |||||||||
| 76,698,396 | 4,294,267 | (2,501,799) | 5,140,393 | 83,631,257 | — | 54,054 | — | 7,361,906 | |
| Columbia Variable Portfolio - Large Cap Index Fund, Class 1 Shares | |||||||||
| 394,041,712 | 55,601,857 | (15,714,612) | (5,528,736) | 428,400,221 | — | (276,241) | — | 17,094,981 | |
| Columbia Variable Portfolio – Limited Duration Credit Fund, Class 1 Shares | |||||||||
| 22,486,366 | 1,608,446 | (554,376) | 739,363 | 24,279,799 | — | 740 | — | 2,411,102 | |
| Columbia Variable Portfolio – Long Government/Credit Bond Fund, Class 1 Shares | |||||||||
| 18,290,049 | 450,299 | (1,099,960) | 2,452,603 | 20,092,991 | — | 111,944 | — | 1,604,872 | |
| Columbia Variable Portfolio – Select Large Cap Value Fund, Class 1 Shares | |||||||||
| 197,282,413 | 50,631,897 | (11,171,641) | (23,624,236) | 213,118,433 | — | (1,249,643) | — | 9,041,936 | |
| Columbia Variable Portfolio – U.S. Government Mortgage Fund, Class 1 Shares | |||||||||
| 22,501,608 | 1,585,068 | (674,047) | 718,767 | 24,131,396 | — | 8,307 | — | 2,203,780 | |
| CTIVP® – American Century Diversified Bond Fund, Class 1 Shares | |||||||||
| 74,322,559 | 4,713,073 | (2,200,871) | 3,337,883 | 80,172,644 | — | (4,255) | — | 6,977,602 | |
| CTIVP® – Loomis Sayles Growth Fund, Class 1 Shares | |||||||||
| 196,598,041 | 10,815,708 | (10,431,827) | 19,718,899 | 216,700,821 | — | 1,280,925 | — | 5,253,353 | |
| CTIVP® – Morgan Stanley Advantage Fund, Class 1 Shares | |||||||||
| 196,450,873 | 8,175,179 | (32,700,082) | 56,639,195 | 228,565,165 | — | 6,684,320 | — | 4,848,646 | |
| CTIVP® – T. Rowe Price Large Cap Value Fund, Class 1 Shares | |||||||||
| 197,201,156 | 56,857,110 | (11,224,486) | (32,165,708) | 210,668,072 | — | (1,576,823) | — | 9,862,738 | |
| CTIVP® – TCW Core Plus Bond Fund, Class 1 Shares | |||||||||
| 71,729,830 | 4,005,840 | (2,676,908) | 4,480,721 | 77,539,483 | — | 67,505 | — | 6,632,975 | |
| CTIVP® – Wells Fargo Short Duration Government Fund, Class 1 Shares | |||||||||
| 10,375,742 | 765,310 | (335,334) | 331,998 | 11,137,716 | — | 5,420 | — | 1,050,728 | |
| Variable Portfolio - Partners Core Bond Fund, Class 1 Shares | |||||||||
| 66,501,891 | 3,789,093 | (2,408,943) | 4,047,218 | 71,929,259 | — | 58,777 | — | 6,085,386 | |
| Variable Portfolio - Partners Core Equity Fund, Class 1 Shares | |||||||||
| 393,925,365 | 58,457,819 | (14,793,938) | (10,607,641) | 426,981,605 | — | (448,768) | — | 18,751,937 | |
| Total | 2,831,215,684 | 23,261,590 | 2,832,300,205 | — | 4,452,731 | 3,032,610 | |||
| (b) | Non-income producing investment. |
| (c) | Represents a security purchased on a when-issued basis. |
| (d) | The rate shown is the seven-day current annualized yield at June 30, 2020. |
Abbreviation Legend
| TBA | To Be Announced |
Currency Legend
| CAD | Canada Dollar |
| USD | US Dollar |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 8 | Variable Portfolio – U.S. Flexible Growth Fund | Semiannual Report 2020 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Certain investments that have been
measured at fair value using the net asset value (NAV) per share (or its equivalent) are not categorized in the fair value hierarchy. The fair value amounts presented in the table are intended to reconcile the fair
value hierarchy to the amounts presented in the Portfolio of Investments. The Variable Portfolios serve as investment vehicles for variable annuity contracts and variable life insurance policies. Principle investment
strategies within these Variable Portfolios vary based on the Portfolios investment objective. Investments in the Variable Portfolios may be redeemed on a daily basis without restriction.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at June 30, 2020:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Assets at NAV ($) | Total ($) | |
| Investments in Securities | |||||
| Equity Funds | — | — | — | 1,938,883,950 | 1,938,883,950 |
| Exchange-Traded Fixed Income Funds | 314,628,450 | — | — | — | 314,628,450 |
| Fixed Income Funds | — | — | — | 416,986,205 | 416,986,205 |
| Residential Mortgage-Backed Securities - Agency | — | 899,770,318 | — | — | 899,770,318 |
| Options Purchased Puts | 34,184,150 | — | — | — | 34,184,150 |
| Money Market Funds | 476,430,050 | — | — | — | 476,430,050 |
| Total Investments in Securities | 825,242,650 | 899,770,318 | — | 2,355,870,155 | 4,080,883,123 |
| Investments in Derivatives | |||||
| Asset | |||||
| Futures Contracts | 5,278,916 | — | — | — | 5,278,916 |
| Swap Contracts | — | 4,113,279 | — | — | 4,113,279 |
| Liability | |||||
| Futures Contracts | (24,884,452) | — | — | — | (24,884,452) |
| Total | 805,637,114 | 903,883,597 | — | 2,355,870,155 | 4,065,390,866 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The Fund’s assets assigned to
the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical
assets.
Futures contracts and swap contracts
are valued at unrealized appreciation (depreciation).
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – U.S. Flexible Growth Fund | Semiannual Report 2020 | 9 |
Statement of Assets and Liabilities
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $1,206,461,809) | $1,214,398,768 |
| Affiliated issuers (cost $2,467,184,518) | 2,832,300,205 |
| Options purchased (cost $31,777,860) | 34,184,150 |
| Cash collateral held at broker for: | |
| Purchased options | 578,000 |
| Margin deposits on: | |
| Futures contracts | 109,128,495 |
| Swap contracts | 11,109,974 |
| Receivable for: | |
| Investments sold | 1,411,711 |
| Capital shares sold | 136,434 |
| Dividends | 97,880 |
| Interest | 961,084 |
| Variation margin for futures contracts | 1,753,313 |
| Variation margin for swap contracts | 410,365 |
| Trustees’ deferred compensation plan | 48,008 |
| Total assets | 4,206,518,387 |
| Liabilities | |
| Payable for: | |
| Investments purchased on a delayed delivery basis | 900,575,081 |
| Capital shares purchased | 2,153,164 |
| Variation margin for futures contracts | 15,869,122 |
| Management services fees | 19,252 |
| Distribution and/or service fees | 22,354 |
| Service fees | 160,158 |
| Compensation of board members | 5,375 |
| Compensation of chief compliance officer | 239 |
| Other expenses | 30,706 |
| Trustees’ deferred compensation plan | 48,008 |
| Total liabilities | 918,883,459 |
| Net assets applicable to outstanding capital stock | $3,287,634,928 |
| Represented by | |
| Trust capital | $3,287,634,928 |
| Total - representing net assets applicable to outstanding capital stock | $3,287,634,928 |
| Class 1 | |
| Net assets | $391,149 |
| Shares outstanding | 28,678 |
| Net asset value per share | $13.64 |
| Class 2 | |
| Net assets | $3,287,243,779 |
| Shares outstanding | 241,783,506 |
| Net asset value per share | $13.60 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 10 | Variable Portfolio – U.S. Flexible Growth Fund | Semiannual Report 2020 |
Statement of Operations
Six Months Ended June 30, 2020 (Unaudited)
Six Months Ended June 30, 2020 (Unaudited)
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $2,645,144 |
| Dividends — affiliated issuers | 3,032,610 |
| Interest | 135,374 |
| Total income | 5,813,128 |
| Expenses: | |
| Management services fees | 3,281,074 |
| Distribution and/or service fees | |
| Class 2 | 3,820,859 |
| Service fees | 918,867 |
| Compensation of board members | 25,023 |
| Custodian fees | 13,427 |
| Printing and postage fees | 21,360 |
| Audit fees | 19,641 |
| Legal fees | 36,889 |
| Compensation of chief compliance officer | 527 |
| Other | 28,736 |
| Total expenses | 8,166,403 |
| Net investment loss | (2,353,275) |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 17,382,160 |
| Investments — affiliated issuers | 4,452,731 |
| Foreign currency translations | (130,476) |
| Futures contracts | (235,332,621) |
| Options purchased | 106,050,584 |
| Swap contracts | 663,289 |
| Net realized loss | (106,914,333) |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | (202,478) |
| Investments — affiliated issuers | 23,261,590 |
| Foreign currency translations | 130,574 |
| Futures contracts | (42,181,463) |
| Options purchased | 10,686,080 |
| Swap contracts | 4,113,279 |
| Net change in unrealized appreciation (depreciation) | (4,192,418) |
| Net realized and unrealized loss | (111,106,751) |
| Net decrease in net assets resulting from operations | $(113,460,026) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Variable Portfolio – U.S. Flexible Growth Fund | Semiannual Report 2020 | 11 |
Statement of Changes in Net Assets
| Six Months Ended June 30, 2020 (Unaudited) | Year Ended December 31, 2019 | |
| Operations | ||
| Net investment income (loss) | $(2,353,275) | $13,544,586 |
| Net realized gain (loss) | (106,914,333) | 48,786,628 |
| Net change in unrealized appreciation (depreciation) | (4,192,418) | 356,276,626 |
| Net increase (decrease) in net assets resulting from operations | (113,460,026) | 418,607,840 |
| Increase in net assets from capital stock activity | 367,970,016 | 908,990,327 |
| Total increase in net assets | 254,509,990 | 1,327,598,167 |
| Net assets at beginning of period | 3,033,124,938 | 1,705,526,771 |
| Net assets at end of period | $3,287,634,928 | $3,033,124,938 |
| Six Months Ended | Year Ended | |||
| June 30, 2020 (Unaudited) | December 31, 2019 (a) | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 20,082 | 273,796 | 9,696 | 133,660 |
| Redemptions | (682) | (9,050) | (418) | (5,629) |
| Net increase | 19,400 | 264,746 | 9,278 | 128,031 |
| Class 2 | ||||
| Subscriptions | 28,560,671 | 379,753,299 | 69,615,922 | 912,520,970 |
| Redemptions | (941,158) | (12,048,029) | (275,141) | (3,658,674) |
| Net increase | 27,619,513 | 367,705,270 | 69,340,781 | 908,862,296 |
| Total net increase | 27,638,913 | 367,970,016 | 69,350,059 | 908,990,327 |
| (a) | Class 1 shares are based on operations from February 20, 2019 (commencement of operations) through the stated period end. |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 12 | Variable Portfolio – U.S. Flexible Growth Fund | Semiannual Report 2020 |
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BLANK]
| Variable Portfolio – U.S. Flexible Growth Fund | Semiannual Report 2020 | 13 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income (loss) | Net realized and unrealized gain (loss) | Total from investment operations | |
| Class 1 | ||||
| Six Months Ended 6/30/2020 (Unaudited) | $14.19 | 0.00(c) | (0.55) | (0.55) |
| Year Ended 12/31/2019(e) | $12.62 | 0.06 | 1.51 | 1.57 |
| Class 2 | ||||
| Six Months Ended 6/30/2020 (Unaudited) | $14.16 | (0.01) | (0.55) | (0.56) |
| Year Ended 12/31/2019 | $11.78 | 0.08 | 2.30 | 2.38 |
| Year Ended 12/31/2018 | $12.26 | 0.05 | (0.53) | (0.48) |
| Year Ended 12/31/2017 | $10.35 | 0.02 | 1.89 | 1.91 |
| Year Ended 12/31/2016(f) | $10.00 | (0.01) | 0.36 | 0.35 |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Rounds to zero. |
| (d) | Annualized. |
| (e) | Class 1 shares commenced operations on February 20, 2019. Per share data and total return reflect activity from that date. |
| (f) | The Fund commenced operations on November 2, 2016. Per share data and total return reflect activity from that date. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 14 | Variable Portfolio – U.S. Flexible Growth Fund | Semiannual Report 2020 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income (loss) ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Six Months Ended 6/30/2020 (Unaudited) | $13.64 | (3.88%) | 0.29%(d) | 0.29%(d) | 0.06%(d) | 98% | $391 |
| Year Ended 12/31/2019(e) | $14.19 | 12.44% | 0.30%(d) | 0.30%(d) | 0.52%(d) | 132% | $132 |
| Class 2 | |||||||
| Six Months Ended 6/30/2020 (Unaudited) | $13.60 | (3.96%) | 0.53%(d) | 0.53%(d) | (0.15%)(d) | 98% | $3,287,244 |
| Year Ended 12/31/2019 | $14.16 | 20.20% | 0.54% | 0.54% | 0.57% | 132% | $3,032,993 |
| Year Ended 12/31/2018 | $11.78 | (3.92%) | 0.55% | 0.55% | 0.38% | 44% | $1,705,527 |
| Year Ended 12/31/2017 | $12.26 | 18.45% | 0.55% | 0.55% | 0.17% | 9% | $998,296 |
| Year Ended 12/31/2016(f) | $10.35 | 3.50% | 0.63%(d) | 0.63%(d) | (0.26%)(d) | 12% | $166,632 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – U.S. Flexible Growth Fund | Semiannual Report 2020 | 15 |
Notes to Financial Statements
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Note 1. Organization
Variable Portfolio – U.S.
Flexible Growth Fund (the Fund), a series of Columbia Funds Variable Insurance Trust (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as
an open-end management investment company organized as a Massachusetts business trust.
The Fund is a
“fund-of-funds”, investing significantly in affiliated funds managed by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc.
(Ameriprise Financial), its affiliates, or third-party advised (unaffiliated) funds, including exchange-traded funds (collectively, Underlying Funds). The Fund is exposed to the same risks as the Underlying Funds in
direct proportion to the allocation of its assets among the Underlying Funds. For information on the investment strategies and risks of the Underlying Funds, please refer to the Fund’s current prospectus and the
prospectuses of the Underlying Funds, which are available, free of charge, from the Securities and Exchange Commission website at www.sec.gov.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1 and Class 2 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued by
affiliated life insurance companies (Participating Insurance Companies) and other qualified institutional investors (Qualified Investors) authorized by Columbia Management Investment Distributors, Inc. (the
Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by buying a Contract.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on any
exchange are valued at the mean between the closing bid and asked prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Asset- and mortgage-backed
securities are generally valued by pricing services, which utilize pricing models that incorporate the securities’ cash flow and loan performance data. These models also take into account available market data,
including trades, market quotations, and benchmark yield curves for identical or similar securities. Factors used to identify similar securities may include, but are not limited to, issuer, collateral type, vintage,
prepayment speeds, collateral performance, credit ratings, credit enhancement and expected life. Asset-backed securities for which quotations are readily available may also be valued based upon an over-the-counter or
exchange bid quote from an approved independent broker-dealer.
Investments in the Underlying Funds
(other than ETFs) are valued at the latest net asset value reported by those companies as of the valuation time.
Futures and options on futures
contracts are valued based upon the settlement price at the close of regular trading on their principal exchanges or, in the absence of transactions, at the mean of the latest quoted bid and ask prices.
| 16 | Variable Portfolio – U.S. Flexible Growth Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Option contracts are valued at the
mean of the latest quoted bid and ask prices on their primary exchanges. Option contracts, including over-the-counter option contracts, with no readily available market quotations are valued using mid-market
evaluations from independent third-party vendors.
Swap transactions are valued
through an independent pricing service or broker, or if neither is available, through an internal model based upon observable inputs.
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Foreign currency transactions and
translations
The values of all assets and
liabilities denominated in foreign currencies are generally translated into U.S. dollars at exchange rates determined at the close of regular trading on the New York Stock Exchange. Net realized and unrealized gains
(losses) on foreign currency transactions and translations include gains (losses) arising from the fluctuation in exchange rates between trade and settlement dates on securities transactions, gains (losses) arising
from the disposition of foreign currency and currency gains (losses) between the accrual and payment dates on dividends, interest income and foreign withholding taxes.
For financial statement purposes,
the Fund does not distinguish that portion of gains (losses) on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations
are included with the net realized and unrealized gains (losses) on investments in the Statement of Operations.
Derivative instruments
The Fund invests in certain
derivative instruments, as detailed below, to meet its investment objectives. Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more securities,
currencies, commodities, indices, or other assets or instruments. Derivatives may be used to increase investment flexibility (including to maintain cash reserves while maintaining desired exposure to certain assets),
for risk management (hedging) purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain investment risks,
such as foreign currency exchange rate risk, interest rate risk and credit risk. Derivatives may involve various risks, including the potential inability of the counterparty to fulfill its obligations under the terms
of the contract, the potential for an illiquid secondary market (making it difficult for the Fund to sell or terminate, including at favorable prices) and the potential for market movements which may expose the Fund
to gains or losses in excess of the amount shown in the Statement of Assets and Liabilities. The notional amounts of derivative instruments, if applicable, are not recorded in the financial statements.
A derivative instrument may suffer
a marked-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform its
obligations under the contract. The Fund’s risk of loss from counterparty credit risk on over-the-counter derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by
the Fund and the amount of any variation margin held by the counterparty, plus any replacement costs or related amounts. With exchange-traded or centrally cleared derivatives, there is reduced counterparty credit risk
to the Fund since the clearinghouse or central counterparty (CCP) provides some protection in the case of clearing member default. The clearinghouse or CCP stands between the buyer and the seller of the contract;
therefore, additional counterparty credit risk is failure of the clearinghouse or CCP. However, credit risk still exists in exchange-traded or centrally cleared derivatives with respect to initial and variation margin
that is held
| Variable Portfolio – U.S. Flexible Growth Fund | Semiannual Report 2020 | 17 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
in a broker’s customer account. While
brokers are required to segregate customer margin from their own assets, in the event that a broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin
held by the broker for all its clients, U.S. bankruptcy laws will typically allocate that shortfall on a pro-rata basis across all the broker’s customers (including the Fund), potentially resulting in losses to
the Fund.
In order to better define its
contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement)
or similar agreement with its derivatives contract counterparties. An ISDA Master Agreement is an agreement between the Fund and a counterparty that governs over-the-counter derivatives and typically contains, among
other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset with the counterparty
certain derivative instrument’s payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment
in the event of default (close-out netting), including the bankruptcy or insolvency of the counterparty. Note, however, that bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or
prohibitions against the right of offset or netting in bankruptcy, insolvency or other events.
Collateral (margin) requirements
differ by type of derivative. Margin requirements are established by the clearinghouse or CCP for exchange-traded and centrally cleared derivatives. Brokers can ask for margin in excess of the minimum in certain
circumstances. Collateral terms are contract specific for over-the-counter derivatives. For over-the-counter derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by
netting the marked-to-market amount for each transaction under such agreement and comparing that amount to the value of any variation margin currently pledged by the Fund and/or the counterparty. Generally, the amount
of collateral due from or to a party has to exceed a minimum transfer amount threshold (e.g., $250,000) before a transfer has to be made. To the extent amounts due to the Fund from its counterparties are not fully
collateralized, contractually or otherwise, the Fund bears the risk of loss from counterparty nonperformance. The Fund may also pay interest expense on cash collateral received from the broker. Any interest expense
paid by the Fund is shown on the Statement of Operations. The Fund attempts to mitigate counterparty risk by only entering into agreements with counterparties that it believes have the financial resources to honor
their obligations and by monitoring the financial stability of those counterparties.
Certain ISDA Master Agreements
allow counterparties of over-the-counter derivatives transactions to terminate derivatives contracts prior to maturity in the event the Fund’s net asset value declines by a stated percentage over a specified
time period or if the Fund fails to meet certain terms of the ISDA Master Agreement, which would cause the Fund to accelerate payment of any net liability owed to the counterparty. The Fund also has termination rights
if the counterparty fails to meet certain terms of the ISDA Master Agreement. In determining whether to exercise such termination rights, the Fund would consider, in addition to counterparty credit risk, whether
termination would result in a net liability owed from the counterparty.
For financial reporting purposes,
the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statement of Assets and Liabilities.
Futures contracts
Futures contracts are
exchange-traded and represent commitments for the future purchase or sale of an asset at a specified price on a specified date. The Fund bought and sold futures contracts to produce incremental earnings, to manage the
duration and yield curve exposure of the Fund versus the benchmark, to manage exposure to movements in interest rates, to manage exposure to the securities market and to maintain appropriate equity market exposure
while keeping sufficient cash to accommodate daily redemptions. These instruments may be used for other purposes in future periods. Upon entering into futures contracts, the Fund bears risks that it may not achieve
the anticipated benefits of the futures contracts and may realize a loss. Additional risks include counterparty credit risk, the possibility of an illiquid market, and that a change in the value of the contract or
option may not correlate with changes in the value of the underlying asset.
Upon entering into a futures
contract, the Fund deposits cash or securities with the broker, known as a futures commission merchant (FCM), in an amount sufficient to meet the initial margin requirement. The initial margin deposit must be
maintained at an established level over the life of the contract. Cash deposited as initial margin is recorded in the Statement of Assets and Liabilities as margin deposits. Securities deposited as initial margin are
designated in the Portfolio of Investments. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are
| 18 | Variable Portfolio – U.S. Flexible Growth Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
equal to the daily change in the contract value
and are recorded as variation margin receivable or payable and are offset in unrealized gains or losses. The Fund recognizes a realized gain or loss when the contract is closed or expires. Futures contracts involve,
to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities.
Options contracts
Options are contracts which entitle
the holder to purchase or sell securities or other identified assets at a specified price, or in the case of index option contracts, to receive or pay the difference between the index value and the strike price of the
index option contract. Option contracts can be either exchange-traded or over-the-counter. The Fund purchased option contracts to produce incremental earnings, to decrease the Fund’s exposure to equity market
risk, to increase return on investments and to facilitate buying and selling of securities for investments. These instruments may be used for other purposes in future periods. Completion of transactions for option
contracts traded in the over-the-counter market depends upon the performance of the other party. Cash collateral may be collected or posted by the Fund to secure certain over-the-counter option contract trades. Cash
collateral held or posted by the Fund for such option contract trades must be returned to the broker or the Fund upon closure, exercise or expiration of the contract.
Options contracts purchased are
recorded as investments. When the Fund writes an options contract, the premium received is recorded as an asset and an amount equivalent to the premium is recorded as a liability in the Statement of Assets and
Liabilities and is subsequently adjusted to reflect the current fair value of the option written. Changes in the fair value of the written option are recorded as unrealized appreciation or depreciation until the
contract is exercised or has expired. The Fund will realize a gain or loss when the option contract is closed or expires. When option contracts are exercised, the proceeds on sales for a written call or purchased put
option contract, or the purchase cost for a written put or purchased call option contract, is adjusted by the amount of premium received or paid.
For over-the-counter options
purchased, the Fund bears the risk of loss of the amount of the premiums paid plus the positive change in market values net of any collateral held by the Fund should the counterparty fail to perform under the
contracts. Option contracts written by the Fund do not typically give rise to significant counterparty credit risk, as options written generally obligate the Fund and not the counterparty to perform. The risk in
writing a call option contract is that the Fund gives up the opportunity for profit if the market price of the security increases above the strike price and the option contract is exercised. The risk in writing a put
option contract is that the Fund may incur a loss if the market price of the security decreases below the strike price and the option contract is exercised. Exercise of a written option could result in the Fund
purchasing or selling a security or foreign currency when it otherwise would not, or at a price different from the current market value. In purchasing and writing options, the Fund bears the risk of an unfavorable
change in the value of the underlying instrument or the risk that the Fund may not be able to enter into a closing transaction due to an illiquid market.
Swap contracts
Swap contracts are negotiated in
the over-the-counter market and may be entered into as a bilateral contract or centrally cleared (centrally cleared swap contract). In a centrally cleared swap contract, immediately following execution of the swap
contract with a broker, the swap contract is novated to a central counterparty (the CCP) and the CCP becomes the Fund’s counterparty to the centrally cleared swap contract. The Fund is required to deposit
initial margin with the futures commission merchant (FCM), which pledges it through to the CCP in the form of cash or securities in an amount that varies depending on the size and risk profile of the particular swap
contract. Securities deposited as initial margin are designated in the Portfolio of Investments and cash deposited is recorded in the Statement of Assets and Liabilities as margin deposits. Unlike a bilateral swap
contract, for centrally cleared swap contracts, the Fund has minimal credit exposure to the FCM because the CCP stands between the Fund and the relevant buyer/seller on the other side of the contract. Swap contracts
are marked-to-market daily and changes in value are recorded as unrealized appreciation (depreciation). The daily change in valuation of centrally cleared swap contracts, if any, is recorded as a receivable or payable
for variation margin in the Statement of Assets and Liabilities.
| Variable Portfolio – U.S. Flexible Growth Fund | Semiannual Report 2020 | 19 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Entering into these contracts
involves, to varying degrees, elements of interest, liquidity and counterparty credit risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that there
may be unfavorable changes in interest rates, market conditions or other conditions, that it may be difficult to initiate a swap transaction or liquidate a position at an advantageous time or price which may result in
significant losses, and that the FCM or CCP may not fulfill its obligation under the contract.
Credit default swap contracts
The Fund entered into credit
default swap contracts to increase or decrease its credit exposure to an index and to manage credit risk exposure. These instruments may be used for other purposes in future periods. Credit default swap contracts are
agreements in which one party pays fixed periodic payments to a counterparty in consideration for an agreement from the counterparty to make a specific payment should a specified credit event(s) take place. Although
specified credit events are contract specific, credit events are generally defined as bankruptcy, failure to pay, restructuring, obligation acceleration, obligation default, or repudiation/moratorium.
As the purchaser of a credit
default swap contract, the Fund purchases protection by paying a periodic interest rate on the notional amount to the counterparty. The interest amount is accrued daily as a component of unrealized appreciation
(depreciation) and is recorded as a realized loss upon payment. If a credit event as specified in the contract occurs, the Fund may have the option either to deliver the reference obligation to the seller in exchange
for a cash payment of its par amount, or to receive a net cash settlement equal to the par amount less an agreed-upon value of the reference obligation as of the date of the credit event. The difference between the
value of the obligation or cash delivered and the notional amount received will be recorded as a realized gain (loss).
As the seller of a credit default
swap contract, the Fund sells protection to a buyer and will generally receive a periodic interest rate on a notional amount. The interest amount is accrued daily as a component of unrealized appreciation
(depreciation) and is recorded as a realized gain upon receipt of the payment. If a credit event as specified in the contract with the counterparty occurs, the Fund may either be required to accept the reference
obligation from the buyer in exchange for a cash payment of its notional amount, or to pay the buyer a net cash settlement equal to the notional amount less an agreed-upon value of the reference obligation (recovery
value) as of the date of the credit event. The difference between the value of the obligation or cash received and the notional amount paid will be recorded as a realized gain (loss). The maximum potential amount of
undiscounted future payments the Fund could be required to make as the seller of protection under a credit default swap contract is equal to the notional amount of the reference obligation. These potential amounts may
be partially offset by any recovery values of the respective reference obligations or upfront receipts upon entering into the agreement. The notional amounts and market values of all credit default swap contracts in
which the Fund is the seller of protection, if any, are disclosed in the Credit Default Swap Contracts Outstanding schedule following the Portfolio of Investments.
As a protection seller, the Fund
bears the risk of loss from the credit events specified in the contract with the counterparty. For credit default swap contracts on credit indices, quoted market prices and resulting market values serve as an
indicator of the current status of the payment/performance risk. Increasing market values, in absolute terms when compared to the notional amount of the swap, represent a deterioration of the reference entity’s
credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the contract.
Any upfront payments or receipts by
the Fund upon entering into a credit default swap contract is recorded as an asset or liability, respectively, and amortized daily as a component of realized gain (loss) in the Statement of Operations. Credit default
swap contracts are valued daily, and the change in value is recorded as unrealized appreciation (depreciation) until the termination of the swap, at which time a realized gain (loss) is recorded.
Credit default swap contracts can
involve greater risks than if a fund had invested in the reference obligation directly since, in addition to general market risks, credit default swaps are subject to counterparty credit risk, leverage risk, hedging
risk, correlation risk and liquidity risk.
| 20 | Variable Portfolio – U.S. Flexible Growth Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Effects of derivative transactions in
the financial statements
The following tables are intended
to provide additional information about the effect of derivatives on the financial statements of the Fund, including: the fair value of derivatives by risk category and the location of those fair values in the
Statement of Assets and Liabilities; and the impact of derivative transactions over the period in the Statement of Operations, including realized and unrealized gains (losses). The derivative instrument schedules
following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any.
The following table is a summary of
the fair value of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) at June 30, 2020:
| Asset derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Credit risk | Component of trust capital — unrealized appreciation on swap contracts | 4,113,279* |
| Equity risk | Component of trust capital — unrealized appreciation on futures contracts | 3,583,401* |
| Equity risk | Investments, at value — Options Purchased | 34,184,150 |
| Interest rate risk | Component of trust capital — unrealized appreciation on futures contracts | 1,695,515* |
| Total | 43,576,345 |
| Liability derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Equity risk | Component of trust capital - unrealized depreciation on futures contracts | 24,634,469* |
| Interest rate risk | Component of trust capital - unrealized depreciation on futures contracts | 249,983* |
| Total | 24,884,452 |
| * | Includes cumulative appreciation (depreciation) as reported in the tables following the Portfolio of Investments. Only the current day’s variation margin is reported in receivables or payables in the Statement of Assets and Liabilities. |
The following table indicates the
effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) in the Statement of Operations for the six months ended June 30, 2020:
| Amount of realized gain (loss) on derivatives recognized in income | ||||
| Risk exposure category | Futures contracts ($) | Options contracts purchased ($) | Swap contracts ($) | Total ($) |
| Credit risk | — | — | 663,289 | 663,289 |
| Equity risk | (250,890,273) | 106,050,584 | — | (144,839,689) |
| Interest rate risk | 15,557,652 | — | — | 15,557,652 |
| Total | (235,332,621) | 106,050,584 | 663,289 | (128,618,748) |
| Change in unrealized appreciation (depreciation) on derivatives recognized in income | ||||
| Risk exposure category | Futures contracts ($) | Options contracts purchased ($) | Swap contracts ($) | Total ($) |
| Credit risk | — | — | 4,113,279 | 4,113,279 |
| Equity risk | (44,128,804) | 10,686,080 | — | (33,442,724) |
| Interest rate risk | 1,947,341 | — | — | 1,947,341 |
| Total | (42,181,463) | 10,686,080 | 4,113,279 | (27,382,104) |
| Variable Portfolio – U.S. Flexible Growth Fund | Semiannual Report 2020 | 21 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
The following table is a summary
of the average outstanding volume by derivative instrument for the six months ended June 30, 2020:
| Derivative instrument | Average notional amounts ($)* |
| Futures contracts — long | 1,196,205,275 |
| Futures contracts — short | 918,437,781 |
| Credit default swap contracts — sell protection | 247,500,000 |
| Derivative instrument | Average value ($)* |
| Options contracts — purchased | 32,945,125 |
| * | Based on the ending quarterly outstanding amounts for the six months ended June 30, 2020. |
Asset- and mortgage-backed
securities
The Fund may invest in asset-backed
and mortgage-backed securities. The maturity dates shown represent the original maturity of the underlying obligation. Actual maturity may vary based upon prepayment activity on these obligations. All, or a portion,
of the obligation may be prepaid at any time because the underlying asset may be prepaid. As a result, decreasing market interest rates could result in an increased level of prepayment. An increased prepayment rate
will have the effect of shortening the maturity of the security. Unless otherwise noted, the coupon rates presented are fixed rates.
Delayed delivery securities
The Fund may trade securities on
other than normal settlement terms, including securities purchased or sold on a “when-issued” or "forward commitment" basis. This may increase risk to the Fund since the other party to the transaction may
fail to deliver, which could cause the Fund to subsequently invest at less advantageous prices. The Fund designates cash or liquid securities in an amount equal to the delayed delivery commitment.
To be announced securities
The Fund may trade securities on a
To Be Announced (TBA) basis. As with other delayed-delivery transactions, a seller agrees to issue a TBA security at a future date. However, the seller does not specify the particular securities to be delivered.
Instead, the Fund agrees to accept any security that meets specified terms.
In some cases, Master Securities
Forward Transaction Agreements (MSFTAs) may be used to govern transactions of certain forward-settling agency mortgage-backed securities, such as delayed-delivery and TBAs, between the Fund and counterparty. The MSFTA
maintains provisions for, among other things, initiation and confirmation, payment and transfer, events of default, termination, and maintenance of collateral relating to such transactions.
Mortgage dollar roll transactions
The Fund may enter into mortgage
“dollar rolls” in which the Fund sells securities for delivery in the current month and simultaneously contracts with the same counterparty to repurchase similar but not identical securities (same type,
coupon and maturity) on a specified future date. During the roll period, the Fund loses the right to receive principal and interest paid on the securities sold. However, the Fund will benefit because it receives
negotiated amounts in the form of reductions of the purchase price for the future purchase plus the interest earned on the cash proceeds of the securities sold until the settlement date of the forward purchase. The
Fund records the incremental difference between the forward purchase and sale of each forward roll as a realized gain or loss. Unless any realized gains exceed the income, capital appreciation, and gain or loss due to
mortgage prepayments that would have been realized on the securities sold as part of the mortgage dollar roll, the use of this technique will diminish the investment performance of the Fund compared to what the
performance would have been without the use of mortgage dollar rolls. All cash proceeds will be invested in instruments that are permissible investments for the Fund. The Fund identifies cash or liquid securities in
an amount equal to the forward purchase price.
| 22 | Variable Portfolio – U.S. Flexible Growth Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
For financial reporting and tax
purposes, the Fund treats “to be announced” mortgage dollar rolls as two separate transactions, one involving the purchase of a security and a separate transaction involving a sale. These transactions may
increase the Fund’s portfolio turnover rate. The Fund does not currently enter into mortgage dollar rolls that are accounted for as financing transactions.
Mortgage dollar rolls involve the
risk that the market value of the securities the Fund is obligated to repurchase may decline below the repurchase price, or that the counterparty may default on its obligations.
Offsetting of assets and
liabilities
The following table presents the
Fund’s gross and net amount of assets and liabilities available for offset under netting arrangements as well as any related collateral received or pledged by the Fund as of June 30, 2020:
| JPMorgan ($) | Morgan Stanley ($) | Total ($) | |
| Assets | |||
| Centrally cleared credit default swap contracts (a) | - | 410,365 | 410,365 |
| Options purchased puts | 34,184,150 | - | 34,184,150 |
| Total assets | 34,184,150 | 410,365 | 34,594,515 |
| Total financial and derivative net assets | 34,184,150 | 410,365 | 34,594,515 |
| Total collateral received (pledged) (b) | - | - | - |
| Net amount (c) | 34,184,150 | 410,365 | 34,594,515 |
| (a) | Centrally cleared swaps are included within payable/receivable for variation margin on the Statement of Assets and Liabilities. |
| (b) | In some instances, the actual collateral received and/or pledged may be more than the amount shown due to overcollateralization. |
| (c) | Represents the net amount due from/(to) counterparties in the event of default. |
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Interest income is recorded on an
accrual basis. Market premiums and discounts, including original issue discounts, are amortized and accreted, respectively, over the expected life of the security on all debt securities, unless otherwise noted. The
Fund classifies gains and losses realized on prepayments received on mortgage-backed securities as adjustments to interest income.
The Fund may place a debt security
on non-accrual status and reduce related interest income when it becomes probable that the interest will not be collected and the amount of uncollectible interest can be reasonably estimated. A defaulted debt security
is removed from non-accrual status when the issuer resumes interest payments or when collectibility of interest is reasonably assured.
Corporate actions and dividend
income are recorded on the ex-dividend date.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a
proportionate change in return of capital to shareholders.
| Variable Portfolio – U.S. Flexible Growth Fund | Semiannual Report 2020 | 23 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
Income and capital gain
distributions from the Underlying Funds, if any, are recorded on the ex-dividend date.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund is treated as a
partnership for federal income tax purposes, and the Fund does not expect to make regular distributions. The Fund will not be subject to federal income tax, and therefore, there is no provision for federal income
taxes. The partners of the Fund are subject to tax on their distributive share of the Fund’s income and loss. The components of the Fund’s net assets are reported at the partner-level for federal income
tax purposes, and therefore, are not presented in the Statement of Assets and Liabilities.
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees and
underlying fund fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager). Under the Management Agreement, the Investment Manager provides the Fund with investment research and advice, as well as
administrative and accounting services. The management services fee is an annual fee that is a blend of (i) 0.02% on assets invested in affiliated underlying funds (including exchange-traded funds and closed-end
funds) that pay a management services fee (or investment advisory services fee, as applicable) to the Investment Manager and (ii) a fee that declines from 0.72% to 0.52%, depending on asset levels, on assets
invested in securities (other than affiliated underlying funds (including exchange-traded funds and closed-end funds) that pay a management services fee (or investment advisory services fee, as applicable) to the
Investment Manager) including other funds advised by the Investment Manager that do not pay a management services fee to the Investment Manager, third party funds, derivatives and individual securities. The annualized
effective management services fee rate for the six months ended June 30, 2020 was 0.21% of the Fund’s average daily net assets.
| 24 | Variable Portfolio – U.S. Flexible Growth Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
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 expense and fee
levels and the Fund may own different proportions of Underlying Funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. These expenses are not reflected in the expenses
shown in Statement of Operations and are not included in the ratios to average net assets shown in the Financial Highlights.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. These members of the Board of Trustees
may participate in a Deferred Compensation Plan (the Deferred Plan) which may be terminated at any time. Obligations of the Deferred Plan will be paid solely out of the Fund’s assets, and all amounts payable
under the Deferred Plan constitute a general unsecured obligation of the Fund.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The annualized
effective service fee rate for the six months ended June 30, 2020, was 0.06% of the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. The Board of Trustees has approved, and the Fund has adopted, a distribution plan
(the Plan) which sets the distribution fees for the Fund. These fees are calculated daily and are intended to compensate the Distributor for selling shares of the Fund. The Fund pays a monthly distribution fee to the
Distributor at the maximum annual rate of 0.25% of the average daily net assets attributable to Class 2 shares of the Fund. The Fund pays no distribution and service fees for Class 1 shares.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, including indirect expenses of the Underlying Funds, after giving effect to fees waived/expenses reimbursed and any balance credits
and/or overdraft charges from the Fund’s custodian, do not exceed the following annual rate(s) as a percentage of the class’ average daily net assets:
| May 1, 2020 through April 30, 2021 | Prior to May 1, 2020 | |
| Class 1 | 0.80% | 0.85% |
| Class 2 | 1.05 | 1.10 |
| Variable Portfolio – U.S. Flexible Growth Fund | Semiannual Report 2020 | 25 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), transaction costs and brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program
fees and expenses, transaction charges and interest on borrowed money, interest, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This
agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements
described above are not recoverable by the Investment Manager or its affiliates in future periods.
Note 4. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $3,992,909,587 and $2,730,814,579, respectively, for the six months ended June 30, 2020, of which
$3,403,116,898 and $2,523,522,402, respectively, were U.S. government securities. The amount of purchase and sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 5. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes referred to
as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 6. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund did not borrow or lend
money under the Interfund Program during the six months ended June 30, 2020.
Note 7. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by Citibank, N.A., HSBC Bank USA, N.A. and JPMorgan Chase Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. The credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment Manager or an affiliated investment manager, severally and
not jointly, permits collective borrowings up to $1 billion. Interest is charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the
one-month LIBOR rate and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a
commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The commitment fee is included in other expenses in the Statement of Operations. This agreement
expires annually in December unless extended or renewed.
The Fund had no borrowings during
the six months ended June 30, 2020.
| 26 | Variable Portfolio – U.S. Flexible Growth Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Note 8. Significant
risks
Credit risk
Credit risk is the risk that the
value of debt instruments in the Fund’s portfolio may decline because the issuer defaults or otherwise becomes unable or unwilling, or is perceived to be unable or unwilling, to honor its financial obligations,
such as making payments to the Fund when due. Credit rating agencies assign credit ratings to certain debt instruments to indicate their credit risk. Lower rated or unrated debt instruments held by the Fund may
present increased credit risk as compared to higher-rated debt instruments.
Derivatives risk
Losses involving derivative
instruments may be substantial, because a relatively small movement in the underlying reference (which is generally the price, rate or other economic indicator associated with a security(ies), commodity, currency or
index or other instrument or asset) may result in a substantial loss for the Fund. In addition to the potential for increased losses, the use of derivative instruments may lead to increased volatility within the Fund.
Derivatives will typically increase the Fund’s exposure to principal risks to which it is otherwise exposed, and may expose the Fund to additional risks, including correlation risk, counterparty risk, hedging
risk, leverage risk, liquidity risk and pricing risk.
Interest rate risk
Interest rate risk is the risk of
losses attributable to changes in interest rates. In general, if prevailing interest rates rise, the values of debt securities tend to fall, and if interest rates fall, the values of debt securities tend to rise.
Actions by governments and central banking authorities can result in increases in interest rates. Increasing interest rates may negatively affect the value of debt securities held by the Fund, resulting in a negative
impact on the Fund’s performance and net asset value per share. In general, the longer the maturity or duration of a debt security, the greater its sensitivity to changes in interest rates. The Fund is subject
to the risk that the income generated by its investments may not keep pace with inflation.
Liquidity risk
Liquidity risk is the risk
associated with a lack of marketability of investments which may make it difficult to sell the investment at a desirable time or price. Changing regulatory, market or other conditions or environments (for example, the
interest rate or credit environments) may adversely affect the liquidity of the Fund’s investments. The Fund may have to accept a lower selling price for the holding, sell other investments, or forego another,
more appealing investment opportunity. Generally, the less liquid the market at the time the Fund sells a portfolio investment, the greater the risk of loss or decline of value to the Fund. A less liquid market can
lead to an increase in Fund redemptions, which may negatively impact Fund performance and net asset value per share, including, for example, if the Fund is forced to sell securities in a down market.
Market and environment risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The Fund performance may also be
significantly negatively impacted by the economic impact of the coronavirus disease 2019 (COVID-19) pandemic. Public health crisis has become a pandemic that has resulted in, and may continue to result in, significant
global economic and societal disruption and market volatility due to disruptions in market access, resource availability, facilities operations, imposition of tariffs, export controls and supply chain disruption,
among others. Such
| Variable Portfolio – U.S. Flexible Growth Fund | Semiannual Report 2020 | 27 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
disruptions may be caused, or exacerbated by,
quarantines and travel restrictions, workforce displacement and loss in human and other resources. The uncertainty surrounding the magnitude, duration, reach, costs and effects of the global pandemic, as well as
actions that have been or could be taken by governmental authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as the uncertainty over impacts to come, of COVID-19 –
and any other infectious illness outbreaks, epidemics and pandemics that may arise in the future – could negatively affect global economies and markets in ways that cannot necessarily be foreseen. In addition,
the impact of infectious illness outbreaks and epidemics in emerging market countries may be greater due to generally less established healthcare systems, governments and financial markets. Public health crises caused
by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The disruptions caused by COVID-19 could prevent the Fund from executing advantageous
investment decisions in a timely manner and negatively impact the Fund’s ability to achieve their investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of
the Fund.
The Investment Manager and its
affiliates have systematically implemented strategies to address the operating environment spurred by the COVID-19 pandemic. To promote the safety and security of our employees and to assure the continuity of our
business operations, we have implemented a work from home protocol for virtually all of our employee population, restricted business travel, and provided resources for complying with the guidance from the World Health
Organization, the U.S. Centers for Disease Control and governments. Our operations teams seek to operate without significant disruptions in service. Our pandemic strategy takes into consideration that a pandemic could
be widespread and may occur in multiple waves, affecting different communities at different times with varying levels of severity. We cannot, however, predict the impact that natural or man-made disasters, including
the COVID-19 pandemic, may have on the ability of our employees and third-party service providers to continue ordinary business operations and technology functions over near- or longer-term periods.
Mortgage- and other asset-backed
securities risk
The value of any mortgage-backed
and other asset-backed securities including collateralized debt obligations, if any, held by the Fund may be affected by, among other things, changes or perceived changes in: interest rates; factors concerning the
interests in and structure of the issuer or the originator of the mortgages or other assets; the creditworthiness of the entities that provide any supporting letters of credit, surety bonds or other credit enhancements;
or the market’s assessment of the quality of underlying assets. Payment of principal and interest on some mortgage-backed securities (but not the market value of the securities themselves) may be guaranteed by
the full faith and credit of a particular U.S. Government agency, authority, enterprise or instrumentality, and some, but not all, are also insured or guaranteed by the U.S. Government. Mortgage-backed securities
issued by non-governmental issuers (such as commercial banks, savings and loan institutions, private mortgage insurance companies, mortgage bankers and other secondary market issuers) may entail greater risk than
obligations guaranteed by the U.S. Government. Mortgage- and other asset-backed securities are subject to liquidity risk and prepayment risk. A decline or flattening of housing values may cause delinquencies in
mortgages (especially sub-prime or non-prime mortgages) underlying mortgage-backed securities and thereby adversely affect the ability of the mortgage-backed securities issuer to make principal and/or interest
payments to mortgage-backed securities holders, including the Fund. Rising or high interest rates tend to extend the duration of mortgage- and other asset-backed securities, making their prices more volatile and more
sensitive to changes in interest rates.
Shareholder concentration risk
At June 30, 2020, affiliated
shareholders of record owned 100.0% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 9. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
| 28 | Variable Portfolio – U.S. Flexible Growth Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Note 10. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial.
| Variable Portfolio – U.S. Flexible Growth Fund | Semiannual Report 2020 | 29 |
Liquidity Risk
Management Program
Pursuant to Rule 22e-4 under the
1940 Act, the Fund has adopted a liquidity risk management program (Program). The Program’s principal objectives include assessing, managing and periodically reviewing the Fund’s liquidity risk. Liquidity
risk is defined as the risk that the Fund could not meet redemption requests without significant dilution of remaining investors’ interests in the Fund.
The Board has appointed the
Investment Manager as the program administrator for the Fund’s Program. The Investment Manager has delegated oversight of the Program to its Liquidity Risk Management Committee (the Committee). At a board
meeting during the fiscal period, the Committee provided the Board with a report addressing the operations of the program and assessing its adequacy and effectiveness of implementation for the period December 1, 2018,
through December 31, 2019, including:
| • | the Fund had sufficient liquidity to both meet redemptions and operate effectively on behalf of shareholders; |
| • | there were no material changes to the Program during the period; |
| • | the implementation of the Program was effective to manage the Fund’s liquidity risk; and |
| • | the Program operated adequately during the period. |
There can be no assurance that the
Program will achieve its objectives in the future. Please refer to the Fund’s prospectus for more information regarding the Fund’s exposure to liquidity risk and other principal risks to which an
investment in the Fund may be subject.
Board Consideration
and Approval of Management
Agreement
On June 17, 2020, the Board of
Trustees (the Board) and the Trustees who are not interested persons (as defined in the Investment Company Act of 1940) (the Independent Trustees) of Columbia Funds Variable Insurance Trust (the Trust) unanimously
approved the continuation of the Management Agreement (the Management Agreement) with Columbia Management Investment Advisers, LLC (the Investment Manager) with respect to Variable Portfolio – U.S. Flexible
Growth Fund (the Fund), a series of the Trust. As detailed below, the Board’s Advisory Fees and Expenses Committee (the Committee) and the Board met on multiple occasions to review and discuss, among themselves,
with the management team of the Investment Manager and with an independent fee consultant, materials provided by the Investment Manager, the independent fee consultant and others before determining to approve the
continuation of the Management Agreement.
In connection with their
deliberations regarding the continuation of the Management Agreement, the Committee and the Board evaluated materials requested from the Investment Manager regarding the Fund and the Management Agreement, and
discussed these materials with representatives of the Investment Manager at Committee meetings held on March 10, 2020, April 30, 2020 and June 17, 2020 and at Board meetings held on March 11, 2020 and June 17, 2020.
In addition, the Board and its various committees consider matters bearing on the Management Agreement at other meetings throughout the year and in prior years and meet regularly with senior management of the Trust
and the Investment Manager. Through the Board’s Investment Oversight Committees, Trustees also meet with selected portfolio managers of the funds the Trustees oversee and with other investment personnel at
various times throughout the year. The Committee and the Board also consulted with the independent fee consultant, Fund counsel and the Independent Trustees’ independent legal counsel, who advised on various
matters with respect to the Committee’s and the Board’s considerations and otherwise assisted the Committee and the Board in their deliberations. On June 17, 2020, the Committee recommended that the Board
approve the continuation of the Management Agreement. On June 17, 2020, the Board, including the Independent Trustees, voting separately, unanimously approved the continuation of the Management Agreement for the
Fund.
| 30 | Variable Portfolio – U.S. Flexible Growth Fund | Semiannual Report 2020 |
Board Consideration and Approval of
Management
Agreement (continued)
The Committee and the Board considered all
information that they, their legal counsel or the Investment Manager believed reasonably necessary to evaluate and to determine whether to recommend for approval or approve the continuation of the Management
Agreement. The information and factors considered by the Committee and the Board in recommending for approval or approving the continuation of the Management Agreement for the Fund included the following:
| • | Information on the investment performance of the Fund relative to the performance of a group of mutual funds determined to be comparable to the Fund by the Investment Manager, as well as performance relative to benchmarks; |
| • | Information on the Fund’s management fees and total expenses, including information comparing the Fund’s expenses to those of a group of comparable mutual funds, as determined by the Investment Manager; |
| • | The Investment Manager’s agreement to contractually limit or cap total operating expenses for the Fund through April 30, 2021 so that total operating expenses (excluding certain fees and expenses, such as transaction costs and certain other investment related expenses, interest, taxes, and infrequent and/or unusual expenses) would not exceed a specified annual rate, as a percentage of the Fund’s net assets; |
| • | The terms and conditions of the Management Agreement; |
| • | The current and proposed terms and conditions of other agreements and arrangements with affiliates of the Investment Manager relating to the operations of the Fund, including agreements with respect to the provision of distribution, transfer agency and shareholder services to the Fund; |
| • | Descriptions of various functions performed by the Investment Manager under the Management Agreement, including portfolio management and portfolio trading practices; |
| • | Information regarding any recently negotiated management fees of similarly-managed portfolios of other institutional clients of the Investment Manager; |
| • | Information regarding the reputation, regulatory history and resources of the Investment Manager, including information regarding senior management, portfolio managers and other personnel; |
| • | Information regarding the capabilities of the Investment Manager with respect to compliance monitoring services, including an assessment of the Investment Manager’s compliance system by the Fund’s Chief Compliance Officer; and |
| • | The profitability to the Investment Manager and its affiliates from their relationships with the Fund. |
Nature, extent and quality of
services provided under the Management Agreement
The Committee and the Board
considered the nature, extent and quality of services provided to the Fund by the Investment Manager and its affiliates under the Management Agreement and under separate agreements for the provision of transfer agency
and shareholder services, and the resources dedicated to the Fund and the other Columbia Funds by the Investment Manager and its affiliates. The Committee and the Board considered, among other things, the Investment
Manager’s ability to attract, motivate and retain highly qualified research, advisory and supervisory investment professionals (including compensation programs for personnel involved in fund management,
reputation and other attributes), the portfolio management services provided by those investment professionals, and the quality of the Investment Manager’s investment research capabilities and trade execution
services. The Committee and the Board also considered the potential benefits to shareholders of investing in a mutual fund that is part of a fund complex offering exposure to a variety of asset classes and investment
disciplines and providing a variety of fund and shareholder services.
The Committee and the Board also
considered the professional experience and qualifications of the senior personnel of the Investment Manager, which included consideration of the Investment Manager’s experience with funds using an investment
strategy similar to that used by the Investment Manager for the Fund. The Committee and the Board noted the compliance programs of and the compliance-related resources provided to the Fund by the Investment Manager
and its affiliates and the resources dedicated by the Investment Manager and its affiliates to risk management, and considered the Investment Manager’s ability to provide administrative services to the Fund and
coordinate the activities of the Fund’s other service
| Variable Portfolio – U.S. Flexible Growth Fund | Semiannual Report 2020 | 31 |
Board Consideration and Approval of
Management
Agreement (continued)
providers. After reviewing these and related
factors, the Committee and the Board concluded, within the context of their overall conclusions, that the nature, extent and quality of the services provided to the Fund under the Management Agreement supported the
continuation of the Management Agreement.
Investment performance
The Committee and the Board
reviewed information about the performance of the Fund over various time periods, including performance information relative to benchmarks, information that compared the performance of the Fund to the performance of a
group of comparable mutual funds as determined by the Investment Manager, and information and analysis provided by the independent fee consultant. The Committee and the Board also reviewed a description of the
Investment Manager’s methodology for identifying the Fund’s peer groups for purposes of performance and expense comparisons.
The Committee and the Board noted
that, through December 31, 2019, the Fund’s performance was in the fortieth and seventh percentile (where the best performance would be in the first percentile) of its category selected by the Investment Manager
for the purposes of performance comparisons for the one- and three-year periods, respectively.
The Committee and the Board also
considered the Investment Manager’s performance and reputation generally, the Investment Manager’s historical responsiveness to Board concerns about performance, and the Investment Manager’s
willingness to take steps intended to improve performance. After reviewing these and related factors, the Committee and the Board concluded, within the context of their overall conclusions, that the performance of the
Fund and the Investment Manager was sufficient, in light of other considerations, to support the continuation of the Management Agreement.
Investment management fee rates
and other expenses
The Committee and the Board
considered the management fees charged to the Fund under the Management Agreement as well as the total expenses incurred by the Fund. In assessing the reasonableness of the fees under the Management Agreement, the
Committee and the Board considered, among other information, the Fund’s total expense ratio as a percentage of average daily net assets. The Committee and the Board considered data provided by the Investment
Manager and the independent fee consultant. The Committee and the Board noted that, as of December 31, 2019, the Fund’s actual management fee and net total expense ratio were ranked in the third and second
quintiles, respectively, (where the lowest fees and expenses would be in the first quintile) against the Fund’s expense universe as determined by the Investment Manager for purposes of expense comparison. The
Committee and the Board also took into account the fee waiver and expense limitation arrangements agreed to by the Investment Manager, as noted above.
The Committee and the Board also
received and considered information about the management fees charged by the Investment Manager to institutional accounts. In considering the fees charged to those accounts, the Committee and the Board took into
account, among other things, the Investment Manager’s representations about the differences between managing mutual funds as compared to other types of accounts, including differences in the services provided,
differences in the risk profile of such business for the Investment Manager and the additional resources required to manage mutual funds effectively. The Committee and the Board also received and considered
information about the fees charged by the Investment Manager for sub-advisory services it provides to comparable unaffiliated funds. In evaluating the Fund’s management fees, the Committee and the Board also
took into account the demands, complexity and quality of the investment management of the Fund.
After reviewing these and related
factors, the Committee and the Board concluded, within the context of their overall conclusions, that the management fee rates and expenses of the Fund, in light of other considerations, supported the continuation of
the Management Agreement.
Costs of services provided and
profitability
The Committee and the Board also
took note of the costs the Investment Manager and its affiliates incur in connection with the services provided and the profitability to the Investment Manager and its affiliates from their relationships with the
Fund, and the efforts undertaken by the Investment Manager and its affiliates to manage efficiently their costs to provide such services.
| 32 | Variable Portfolio – U.S. Flexible Growth Fund | Semiannual Report 2020 |
Board Consideration and Approval of
Management
Agreement (continued)
The Committee and the Board also considered the
compensation directly or indirectly received by the Investment Manager’s affiliates in connection with their relationships with the Fund. The Committee and the Board reviewed information provided by management
as to the profitability to the Investment Manager and its affiliates of their relationships with the Fund, information about the allocation of expenses used to calculate profitability, and comparisons of profitability
levels realized in 2019 to profitability levels realized in 2018. When reviewing profitability, the Committee and the Board also considered court cases in which adviser profitability was an issue in whole or in part,
the performance of similarly managed funds, the performance of the Fund, and the expense ratio of the Fund. In addition, the Committee and the Board considered information provided by the Investment Manager regarding
the Investment Manager’s financial condition and comparing its profitability to that of other asset management firms that are, or are subsidiaries of, publicly traded companies. In this regard, the Committee and
the Board also considered data provided by the independent fee consultant.
After reviewing these and related
factors, the Committee and the Board concluded, within the context of their overall conclusions, that the costs of services provided and the profitability to the Investment Manager and its affiliates from their
relationships with the Fund supported the continuation of the Management Agreement.
Economies of scale
The Committee and the Board
considered the potential existence of economies of scale in the provision by the Investment Manager of services to the Fund, to groups of related funds, and to the Investment Manager’s investment advisory
clients as a whole, and whether those economies of scale were shared with the Fund through breakpoints in investment management fees or other means, such as expense limitation arrangements and additional investments
by the Investment Manager in investment, trading, compliance and other resources. The Committee and the Board noted that the management fee schedules for the Fund contained breakpoints that would reduce the fee rate
on assets above specified threshold levels.
In considering these matters, the
Committee and the Board also considered the costs of the services provided and the profitability to the Investment Manager and its affiliates from their relationships with the Fund, as noted above. After reviewing
these and related factors, the Committee and the Board concluded, within the context of their overall conclusions, that the extent to which any economies of scale were expected to be shared with the Fund supported the
continuation of the Management Agreement.
Other benefits to the Investment
Manager
The Committee and the Board
received and considered information regarding “fall-out” or ancillary benefits received by the Investment Manager and its affiliates as a result of their relationships with the Fund, such as the engagement
of the Investment Manager’s affiliates to provide distribution, transfer agency and shareholder services to the Fund. In this regard, among other matters, the Committee and the Board considered that the
Fund’s distributor retains a portion of the distribution fees from the Fund. The Committee and the Board also considered the benefits of research made available to the Investment Manager by reason of brokerage
commissions generated by the Fund’s securities transactions, and reviewed information about the Investment Manager’s practices with respect to considering brokerage and research services when allocating
portfolio transactions. In this connection, the Board also noted that the amount of research made available to the Investment Manager by reason of brokerage commissions had been declining over time, and may decline
further. The Committee and the Board also considered the tax benefits provided to affiliates of the Investment Manager as a result of the election by certain Funds to be taxed as partnerships. The Committee and the
Board recognized that the Investment Manager’s profitability would be somewhat lower without these benefits.
Conclusion
The Committee and the Board
reviewed all of the above considerations in reaching their decisions to recommend or approve the continuation of the Management Agreement. In their deliberations, the Trustees did not identify any particular
information that was all-important or controlling, and individual Trustees may have attributed different weights to the various factors. Based on their evaluation of all factors that they deemed to be material,
including those factors described above, and assisted by the advice of independent legal counsel, the Board, including the Independent Trustees, voting separately, unanimously approved the continuation of the
Management Agreement.
| Variable Portfolio – U.S. Flexible Growth Fund | Semiannual Report 2020 | 33 |
Results of Meeting of
Shareholders
At a Joint Special Meeting of
Shareholders held on April 16, 2020, shareholders of Columbia Funds Variable Insurance Trust elected each of the ten nominees for the trustees to the Board of Trustees of Columbia Funds Variable Insurance Trust, each
to hold office until he or she dies, resigns or is removed or, if sooner, until the next meeting of shareholders called for the purpose of electing trustees and until the election and qualification of his or her
successor, as follows:
| Trustee | Votes For | Votes Withheld | Abstentions |
| Janet L. Carrig | 26,231,108,809 | 1,129,334,152 | 0 |
| J. Kevin Connaughton | 26,249,644,638 | 1,110,798,323 | 0 |
| Olive Darragh | 26,323,990,658 | 1,036,452,304 | 0 |
| Douglas A. Hacker | 26,255,762,920 | 1,104,680,042 | 0 |
| Nancy T. Lukitsh | 26,332,381,722 | 1,028,061,240 | 0 |
| David M. Moffett | 26,252,719,395 | 1,107,723,567 | 0 |
| John J. Neuhauser | 26,222,694,456 | 1,137,748,505 | 0 |
| Christopher O. Petersen | 26,265,703,212 | 1,094,739,749 | 0 |
| Patrick J. Simpson | 26,222,908,024 | 1,137,534,938 | 0 |
| Natalie A. Trunow | 26,340,164,732 | 1,020,278,229 | 0 |
| 34 | Variable Portfolio – U.S. Flexible Growth Fund | Semiannual Report 2020 |
[THIS PAGE INTENTIONALLY LEFT
BLANK]
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 225 Franklin Street, Boston, MA
02110-2804
© 2020 Columbia Management Investment
Advisers, LLC.
S-2016 AP (8/20)
Variable Portfolio
– U.S. Flexible Moderate Growth Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
| 3 | |
| 5 | |
| 6 | |
| 10 | |
| 11 | |
| 12 | |
| 14 | |
| 16 | |
| 30 | |
| 30 | |
| 34 |
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which Variable Portfolio – U.S. Flexible Moderate Growth Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov.
Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge
by visiting columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT, and for reporting periods ended prior to March 31, 2019, on Form N-Q. The Fund’s Form N-Q and Form N-PORT
filings are available on the SEC’s website at sec.gov. The Fund’s complete schedule of portfolio holdings, as filed on Form N-Q or Form N-PORT, can also be obtained without charge, upon request, by calling
800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
225 Franklin Street
Boston, MA 02110
Fund distributor
Columbia Management Investment Distributors,
Inc.
225 Franklin Street
Boston, MA 02110
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Variable Portfolio – U.S. Flexible Moderate
Growth Fund | Semiannual Report 2020
Fund at a Glance
(Unaudited)
(Unaudited)
Investment objective
The Fund
pursues total return while seeking to manage the Fund’s exposure to equity market volatility.
Portfolio management
Brian Virginia
Lead Portfolio Manager
Managed Fund since 2016
Anwiti Bahuguna, Ph.D.
Portfolio Manager
Managed Fund since 2016
David Weiss, CFA
Portfolio Manager
Managed Fund since 2016
Joshua Kutin, CFA
Portfolio Manager
Managed Fund since 2018
| Variable Portfolio – U.S. Flexible Moderate Growth Fund | Semiannual Report 2020 | 3 |
Fund at a Glance (continued)
(Unaudited)
(Unaudited)
| Portfolio Allocation (%) (at June 30, 2020) | |
| Allocations to Underlying Funds | |
| Equity Funds | 37.7 |
| U.S. Large Cap | 37.7 |
| Exchange-Traded Fixed Income Funds | 8.1 |
| Investment Grade | 8.1 |
| Fixed Income Funds | 21.9 |
| High Yield | 1.3 |
| Investment Grade | 20.6 |
| Allocations to Tactical Assets | |
| Money Market Fund Shares Held to Cover Open Derivatives Instruments(a) | 12.5 |
| Options Purchased Puts | 0.8 |
| Residential Mortgage-Backed Securities - Agency | 19.0 |
| Total | 100.0 |
| (a) | Includes investments in Money Market Funds (amounting to $282.5 million) which have been segregated to cover obligations relating to the Fund’s investment in derivatives as part of its tactical allocation strategy. For a description of the Fund’s investments in derivatives, see Investments in derivatives following the Portfolio of Investments and Note 2 to the Notes to Financial Statements. |
Percentages indicated are based upon
total investments including options purchased and excluding all other investments in derivatives, if any. The Fund’s portfolio composition is subject to change.
| 4 | Variable Portfolio – U.S. Flexible Moderate Growth Fund | Semiannual Report 2020 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount 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 results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
In addition to the ongoing expenses
which the Fund bears directly, the Fund’s shareholders indirectly bear the Fund’s allocable share of the costs and expenses of each underlying fund in which the Fund invests. You can also estimate the
effective expenses paid during the period, which includes the indirect fees associated with investing in the underlying funds, by using the amounts listed in the "Effective expenses paid during the period" column.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
| January 1, 2020 — June 30, 2020 | ||||||||||
| Account value at the beginning of the period ($) | Account value at the end of the period ($) | Expenses paid during the period ($) | Fund’s annualized expense ratio (%) | Effective expenses paid during the period ($) | Fund’s effective annualized expense ratio (%) | |||||
| Actual | Hypothetical | Actual | Hypothetical | Actual | Hypothetical | Actual | Actual | Hypothetical | Actual | |
| Class 1 | 1,000.00 | 1,000.00 | 981.40 | 1,023.42 | 1.43 | 1.46 | 0.29 | 3.40 | 3.47 | 0.69 |
| Class 2 | 1,000.00 | 1,000.00 | 980.60 | 1,022.18 | 2.66 | 2.72 | 0.54 | 4.63 | 4.73 | 0.94 |
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 366.
Effective expenses paid during the
period and the Fund’s effective annualized expense ratio include expenses borne directly to the class plus the Fund’s pro rata portion of the ongoing expenses charged by the underlying funds using the
expense ratio of each class of the underlying funds as of the underlying fund’s most recent shareholder report.
| Variable Portfolio – U.S. Flexible Moderate Growth Fund | Semiannual Report 2020 | 5 |
Portfolio of Investments
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
(Percentages represent value of
investments compared to net assets)
Investments in securities
At June 30, 2020,
securities and/or cash totaling $53,804,494 were pledged as collateral.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 6 | Variable Portfolio – U.S. Flexible Moderate Growth Fund | Semiannual Report 2020 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Investments in derivatives
| Long futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| S&P 500 Index E-mini | 413 | 09/2020 | USD | 63,812,630 | 1,815,186 | — |
| U.S. Long Bond | 556 | 09/2020 | USD | 99,280,750 | 184,778 | — |
| U.S. Treasury 10-Year Note | 815 | 09/2020 | USD | 113,425,078 | 297,627 | — |
| U.S. Treasury 2-Year Note | 468 | 09/2020 | USD | 103,347,563 | 11,248 | — |
| U.S. Treasury 5-Year Note | 930 | 09/2020 | USD | 116,940,235 | 252,394 | — |
| U.S. Ultra Treasury Bond | 166 | 09/2020 | USD | 36,213,938 | — | (136,504) |
| Total | 2,561,233 | (136,504) | ||||
| Short futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| S&P 500 Index E-mini | (2,968) | 09/2020 | USD | (458,585,680) | — | (10,312,608) |
| S&P/TSX 60 Index | (90) | 09/2020 | CAD | (16,713,000) | — | (374,923) |
| Total | — | (10,687,531) | ||||
| Put option contracts purchased | ||||||||
| Description | Counterparty | Trading currency | Notional amount | Number of contracts | Exercise price/Rate | Expiration date | Cost ($) | Value ($) |
| S&P 500 Index | JPMorgan | USD | 158,114,790 | 510 | 2,600.00 | 12/17/2021 | 8,784,870 | 11,510,700 |
| S&P 500 Index | JPMorgan | USD | 75,027,018 | 242 | 2,400.00 | 12/17/2021 | 4,501,792 | 3,857,480 |
| S&P 500 Index | JPMorgan | USD | 38,753,625 | 125 | 2,500.00 | 12/17/2021 | 2,108,590 | 2,293,750 |
| Total | 15,395,252 | 17,661,930 | ||||||
| Cleared credit default swap contracts - sell protection | ||||||||||||
| Reference entity | Counterparty | Maturity date | Receive fixed rate (%) | Payment frequency | Implied credit spread (%)* | Notional currency | Notional amount | Value ($) | Upfront payments ($) | Upfront receipts ($) | Unrealized appreciation ($) | Unrealized depreciation ($) |
| Markit CDX North America Investment Grade Index, Series 34 | Morgan Stanley | 06/20/2025 | 1.000 | Quarterly | 0.762 | USD | 125,000,000 | 1,704,731 | — | — | 1,704,731 | — |
| * | Implied credit spreads, represented in absolute terms, utilized in determining the market value of credit default swap agreements on corporate or sovereign issues as of period end serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement. |
Notes to Portfolio of
Investments
| (a) | As defined in the Investment Company Act of 1940, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the period ended June 30, 2020 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Capital gain distributions($) | Realized gain (loss)($) | Dividends — affiliated issuers ($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.253% | |||||||||
| 379,061,811 | 609,556,499 | (706,120,292) | 35,323 | 282,533,341 | — | 2,906 | 1,708,633 | 282,533,341 | |
| Columbia Variable Portfolio – Disciplined Core Fund, Class 1 Shares | |||||||||
| 91,387,243 | 8,901,629 | (3,932,848) | (1,224,136) | 95,131,888 | — | (16,373) | — | 1,671,914 | |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – U.S. Flexible Moderate Growth Fund | Semiannual Report 2020 | 7 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Notes
to Portfolio of Investments (continued)
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Capital gain distributions($) | Realized gain (loss)($) | Dividends — affiliated issuers ($) | End of period shares |
| Columbia Variable Portfolio – Income Opportunities Fund, Class 1 Shares | |||||||||
| 27,710,814 | 2,539,121 | (553,050) | (1,065,007) | 28,631,878 | — | (41,643) | — | 3,906,123 | |
| Columbia Variable Portfolio – Intermediate Bond Fund, Class 1 Shares | |||||||||
| 94,555,648 | 4,172,936 | (5,398,744) | 6,140,419 | 99,470,259 | — | 118,745 | — | 8,756,185 | |
| Columbia Variable Portfolio - Large Cap Index Fund, Class 1 Shares | |||||||||
| 183,675,859 | 16,672,280 | (6,293,866) | (3,532,915) | 190,521,358 | — | 109,506 | — | 7,602,608 | |
| Columbia Variable Portfolio – Limited Duration Credit Fund, Class 1 Shares | |||||||||
| 27,822,176 | 1,478,923 | (1,170,771) | 891,769 | 29,022,097 | — | (3,211) | — | 2,882,035 | |
| Columbia Variable Portfolio – Long Government/Credit Bond Fund, Class 1 Shares | |||||||||
| 22,651,137 | 462,487 | (2,068,896) | 2,922,765 | 23,967,493 | — | 203,026 | — | 1,914,337 | |
| Columbia Variable Portfolio – Select Large Cap Value Fund, Class 1 Shares | |||||||||
| 92,312,417 | 16,965,488 | (2,534,602) | (11,753,387) | 94,989,916 | — | (271,656) | — | 4,030,119 | |
| Columbia Variable Portfolio – U.S. Government Mortgage Fund, Class 1 Shares | |||||||||
| 27,815,300 | 1,529,540 | (1,406,713) | 866,389 | 28,804,516 | — | 19,543 | — | 2,630,549 | |
| CTIVP® – American Century Diversified Bond Fund, Class 1 Shares | |||||||||
| 91,666,736 | 4,225,141 | (4,505,821) | 4,051,398 | 95,437,454 | — | (19,640) | — | 8,306,132 | |
| CTIVP® – Loomis Sayles Growth Fund, Class 1 Shares | |||||||||
| 91,927,672 | 1,837,248 | (6,800,246) | 8,184,765 | 95,149,439 | — | 1,063,674 | — | 2,306,653 | |
| CTIVP® – Morgan Stanley Advantage Fund, Class 1 Shares | |||||||||
| 91,216,448 | 2,305,002 | (20,243,225) | 23,236,606 | 96,514,831 | — | 5,091,063 | — | 2,047,408 | |
| CTIVP® – T. Rowe Price Large Cap Value Fund, Class 1 Shares | |||||||||
| 91,535,607 | 20,091,074 | (2,391,508) | (15,609,831) | 93,625,342 | — | (315,521) | — | 4,383,209 | |
| CTIVP® – TCW Core Plus Bond Fund, Class 1 Shares | |||||||||
| 88,522,911 | 3,793,294 | (5,221,673) | 5,374,530 | 92,469,062 | — | 129,088 | — | 7,910,099 | |
| CTIVP® – Wells Fargo Short Duration Government Fund, Class 1 Shares | |||||||||
| 12,670,335 | 733,813 | (676,506) | 393,840 | 13,121,482 | — | 11,009 | — | 1,237,876 | |
| Variable Portfolio - Partners Core Bond Fund, Class 1 Shares | |||||||||
| 82,020,524 | 3,567,829 | (4,766,782) | 4,849,581 | 85,671,152 | — | 122,852 | — | 7,247,982 | |
| Variable Portfolio - Partners Core Equity Fund, Class 1 Shares | |||||||||
| 183,152,051 | 18,193,274 | (5,247,179) | (5,781,907) | 190,316,239 | — | (52,176) | — | 8,358,201 | |
| Total | 1,679,704,689 | 17,980,202 | 1,635,377,747 | — | 6,151,192 | 1,708,633 | |||
| (b) | Non-income producing investment. |
| (c) | Represents a security purchased on a when-issued basis. |
| (d) | The rate shown is the seven-day current annualized yield at June 30, 2020. |
Abbreviation Legend
| TBA | To Be Announced |
Currency Legend
| CAD | Canada Dollar |
| USD | US Dollar |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 8 | Variable Portfolio – U.S. Flexible Moderate Growth Fund | Semiannual Report 2020 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Certain investments that have been
measured at fair value using the net asset value (NAV) per share (or its equivalent) are not categorized in the fair value hierarchy. The fair value amounts presented in the table are intended to reconcile the fair
value hierarchy to the amounts presented in the Portfolio of Investments. The Variable Portfolios serve as investment vehicles for variable annuity contracts and variable life insurance policies. Principle investment
strategies within these Variable Portfolios vary based on the Portfolios investment objective. Investments in the Variable Portfolios may be redeemed on a daily basis without restriction.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at June 30, 2020:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Assets at NAV ($) | Total ($) | |
| Investments in Securities | |||||
| Equity Funds | — | — | — | 856,249,013 | 856,249,013 |
| Exchange-Traded Fixed Income Funds | 184,477,467 | — | — | — | 184,477,467 |
| Fixed Income Funds | — | — | — | 496,595,393 | 496,595,393 |
| Residential Mortgage-Backed Securities - Agency | — | 431,760,272 | — | — | 431,760,272 |
| Options Purchased Puts | 17,661,930 | — | — | — | 17,661,930 |
| Money Market Funds | 282,533,341 | — | — | — | 282,533,341 |
| Total Investments in Securities | 484,672,738 | 431,760,272 | — | 1,352,844,406 | 2,269,277,416 |
| Investments in Derivatives | |||||
| Asset | |||||
| Futures Contracts | 2,561,233 | — | — | — | 2,561,233 |
| Swap Contracts | — | 1,704,731 | — | — | 1,704,731 |
| Liability | |||||
| Futures Contracts | (10,824,035) | — | — | — | (10,824,035) |
| Total | 476,409,936 | 433,465,003 | — | 1,352,844,406 | 2,262,719,345 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The Fund’s assets assigned to
the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical
assets.
Futures contracts are valued at
unrealized appreciation (depreciation).
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – U.S. Flexible Moderate Growth Fund | Semiannual Report 2020 | 9 |
Statement of Assets and Liabilities
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $606,294,252) | $616,237,739 |
| Affiliated issuers (cost $1,436,603,257) | 1,635,377,747 |
| Options purchased (cost $15,395,252) | 17,661,930 |
| Cash collateral held at broker for: | |
| TBA | 253,000 |
| Margin deposits on: | |
| Futures contracts | 48,843,878 |
| Swap contracts | 4,707,616 |
| Receivable for: | |
| Investments sold | 1,088,109 |
| Dividends | 58,675 |
| Interest | 461,846 |
| Variation margin for futures contracts | 884,938 |
| Variation margin for swap contracts | 173,883 |
| Trustees’ deferred compensation plan | 36,684 |
| Total assets | 2,325,786,045 |
| Liabilities | |
| Payable for: | |
| Investments purchased on a delayed delivery basis | 432,134,612 |
| Capital shares purchased | 1,554,441 |
| Variation margin for futures contracts | 6,966,816 |
| Management services fees | 11,253 |
| Distribution and/or service fees | 12,824 |
| Service fees | 92,242 |
| Compensation of board members | 3,995 |
| Compensation of chief compliance officer | 149 |
| Other expenses | 30,407 |
| Trustees’ deferred compensation plan | 36,684 |
| Total liabilities | 440,843,423 |
| Net assets applicable to outstanding capital stock | $1,884,942,622 |
| Represented by | |
| Trust capital | $1,884,942,622 |
| Total - representing net assets applicable to outstanding capital stock | $1,884,942,622 |
| Class 1 | |
| Net assets | $511,878 |
| Shares outstanding | 38,901 |
| Net asset value per share | $13.16 |
| Class 2 | |
| Net assets | $1,884,430,744 |
| Shares outstanding | 143,633,450 |
| Net asset value per share | $13.12 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 10 | Variable Portfolio – U.S. Flexible Moderate Growth Fund | Semiannual Report 2020 |
Statement of Operations
Six Months Ended June 30, 2020 (Unaudited)
Six Months Ended June 30, 2020 (Unaudited)
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $1,807,044 |
| Dividends — affiliated issuers | 1,708,633 |
| Interest | 67,559 |
| Total income | 3,583,236 |
| Expenses: | |
| Management services fees | 2,001,699 |
| Distribution and/or service fees | |
| Class 2 | 2,266,121 |
| Service fees | 544,605 |
| Compensation of board members | 18,072 |
| Custodian fees | 12,363 |
| Printing and postage fees | 16,769 |
| Audit fees | 19,642 |
| Legal fees | 22,313 |
| Compensation of chief compliance officer | 319 |
| Other | 18,996 |
| Total expenses | 4,920,899 |
| Net investment loss | (1,337,663) |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 9,403,615 |
| Investments — affiliated issuers | 6,151,192 |
| Foreign currency translations | (55,916) |
| Futures contracts | (107,343,411) |
| Options purchased | 48,258,758 |
| Swap contracts | 276,767 |
| Net realized loss | (43,308,995) |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | 2,160,723 |
| Investments — affiliated issuers | 17,980,202 |
| Foreign currency translations | 55,960 |
| Futures contracts | (19,065,064) |
| Options purchased | 6,293,636 |
| Swap contracts | 1,704,731 |
| Net change in unrealized appreciation (depreciation) | 9,130,188 |
| Net realized and unrealized loss | (34,178,807) |
| Net decrease in net assets resulting from operations | $(35,516,470) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Variable Portfolio – U.S. Flexible Moderate Growth Fund | Semiannual Report 2020 | 11 |
Statement of Changes in Net Assets
| Six Months Ended June 30, 2020 (Unaudited) | Year Ended December 31, 2019 | |
| Operations | ||
| Net investment income (loss) | $(1,337,663) | $15,746,425 |
| Net realized gain (loss) | (43,308,995) | 26,142,228 |
| Net change in unrealized appreciation (depreciation) | 9,130,188 | 192,384,953 |
| Net increase (decrease) in net assets resulting from operations | (35,516,470) | 234,273,606 |
| Increase in net assets from capital stock activity | 87,373,013 | 456,784,780 |
| Total increase in net assets | 51,856,543 | 691,058,386 |
| Net assets at beginning of period | 1,833,086,079 | 1,142,027,693 |
| Net assets at end of period | $1,884,942,622 | $1,833,086,079 |
| Six Months Ended | Year Ended | |||
| June 30, 2020 (Unaudited) | December 31, 2019 (a) | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 16,791 | 223,083 | 22,369 | 288,470 |
| Redemptions | (214) | (2,754) | (45) | (643) |
| Net increase | 16,577 | 220,329 | 22,324 | 287,827 |
| Class 2 | ||||
| Subscriptions | 9,643,590 | 124,679,131 | 37,126,401 | 462,990,250 |
| Redemptions | (2,959,272) | (37,526,447) | (505,591) | (6,493,297) |
| Net increase | 6,684,318 | 87,152,684 | 36,620,810 | 456,496,953 |
| Total net increase | 6,700,895 | 87,373,013 | 36,643,134 | 456,784,780 |
| (a) | Class 1 shares are based on operations from February 20, 2019 (commencement of operations) through the stated period end. |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 12 | Variable Portfolio – U.S. Flexible Moderate Growth Fund | Semiannual Report 2020 |
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| Variable Portfolio – U.S. Flexible Moderate Growth Fund | Semiannual Report 2020 | 13 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income (loss) | Net realized and unrealized gain (loss) | Total from investment operations | |
| Class 1 | ||||
| Six Months Ended 6/30/2020 (Unaudited) | $13.41 | 0.01 | (0.26) | (0.25) |
| Year Ended 12/31/2019(d) | $12.05 | 0.20 | 1.16 | 1.36 |
| Class 2 | ||||
| Six Months Ended 6/30/2020 (Unaudited) | $13.38 | (0.01) | (0.25) | (0.26) |
| Year Ended 12/31/2019 | $11.38 | 0.13 | 1.87 | 2.00 |
| Year Ended 12/31/2018 | $11.76 | 0.09 | (0.47) | (0.38) |
| Year Ended 12/31/2017 | $10.21 | 0.06 | 1.49 | 1.55 |
| Year Ended 12/31/2016(e) | $10.00 | (0.01) | 0.22 | 0.21 |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Annualized. |
| (d) | Class 1 shares commenced operations on February 20, 2019. Per share data and total return reflect activity from that date. |
| (e) | The Fund commenced operations on November 2, 2016. Per share data and total return reflect activity from that date. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 14 | Variable Portfolio – U.S. Flexible Moderate Growth Fund | Semiannual Report 2020 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income (loss) ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Six Months Ended 6/30/2020 (Unaudited) | $13.16 | (1.86%) | 0.29%(c) | 0.29%(c) | 0.09%(c) | 85% | $512 |
| Year Ended 12/31/2019(d) | $13.41 | 11.29% | 0.30%(c) | 0.30%(c) | 1.84%(c) | 125% | $299 |
| Class 2 | |||||||
| Six Months Ended 6/30/2020 (Unaudited) | $13.12 | (1.94%) | 0.54%(c) | 0.54%(c) | (0.15%)(c) | 85% | $1,884,431 |
| Year Ended 12/31/2019 | $13.38 | 17.57% | 0.55% | 0.55% | 1.05% | 125% | $1,832,787 |
| Year Ended 12/31/2018 | $11.38 | (3.23%) | 0.56% | 0.56% | 0.74% | 42% | $1,142,028 |
| Year Ended 12/31/2017 | $11.76 | 15.18% | 0.56% | 0.56% | 0.56% | 9% | $715,814 |
| Year Ended 12/31/2016(e) | $10.21 | 2.10% | 0.75%(c) | 0.64%(c) | (0.16%)(c) | 16% | $89,784 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – U.S. Flexible Moderate Growth Fund | Semiannual Report 2020 | 15 |
Notes to Financial Statements
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Note 1. Organization
Variable Portfolio – U.S.
Flexible Moderate Growth Fund (the Fund), a series of Columbia Funds Variable Insurance Trust (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940
Act), as an open-end management investment company organized as a Massachusetts business trust.
The Fund is a
“fund-of-funds”, investing significantly in affiliated funds managed by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc.
(Ameriprise Financial), its affiliates, or third-party advised (unaffiliated) funds, including exchange-traded funds (collectively, Underlying Funds). The Fund is exposed to the same risks as the Underlying Funds in
direct proportion to the allocation of its assets among the Underlying Funds. For information on the investment strategies and risks of the Underlying Funds, please refer to the Fund’s current prospectus and the
prospectuses of the Underlying Funds, which are available, free of charge, from the Securities and Exchange Commission website at www.sec.gov.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1 and Class 2 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued by
affiliated life insurance companies (Participating Insurance Companies) and other qualified institutional investors (Qualified Investors) authorized by Columbia Management Investment Distributors, Inc. (the
Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by buying a Contract.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on any
exchange are valued at the mean between the closing bid and asked prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Asset- and mortgage-backed
securities are generally valued by pricing services, which utilize pricing models that incorporate the securities’ cash flow and loan performance data. These models also take into account available market data,
including trades, market quotations, and benchmark yield curves for identical or similar securities. Factors used to identify similar securities may include, but are not limited to, issuer, collateral type, vintage,
prepayment speeds, collateral performance, credit ratings, credit enhancement and expected life. Asset-backed securities for which quotations are readily available may also be valued based upon an over-the-counter or
exchange bid quote from an approved independent broker-dealer.
Investments in the Underlying Funds
(other than ETFs) are valued at the latest net asset value reported by those companies as of the valuation time.
Futures and options on futures
contracts are valued based upon the settlement price at the close of regular trading on their principal exchanges or, in the absence of transactions, at the mean of the latest quoted bid and ask prices.
| 16 | Variable Portfolio – U.S. Flexible Moderate Growth Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Option contracts are valued at the
mean of the latest quoted bid and ask prices on their primary exchanges. Option contracts, including over-the-counter option contracts, with no readily available market quotations are valued using mid-market
evaluations from independent third-party vendors.
Swap transactions are valued
through an independent pricing service or broker, or if neither is available, through an internal model based upon observable inputs.
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Foreign currency transactions and
translations
The values of all assets and
liabilities denominated in foreign currencies are generally translated into U.S. dollars at exchange rates determined at the close of regular trading on the New York Stock Exchange. Net realized and unrealized gains
(losses) on foreign currency transactions and translations include gains (losses) arising from the fluctuation in exchange rates between trade and settlement dates on securities transactions, gains (losses) arising
from the disposition of foreign currency and currency gains (losses) between the accrual and payment dates on dividends, interest income and foreign withholding taxes.
For financial statement purposes,
the Fund does not distinguish that portion of gains (losses) on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations
are included with the net realized and unrealized gains (losses) on investments in the Statement of Operations.
Derivative instruments
The Fund invests in certain
derivative instruments, as detailed below, to meet its investment objectives. Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more securities,
currencies, commodities, indices, or other assets or instruments. Derivatives may be used to increase investment flexibility (including to maintain cash reserves while maintaining desired exposure to certain assets),
for risk management (hedging) purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain investment risks,
such as foreign currency exchange rate risk, interest rate risk and credit risk. Derivatives may involve various risks, including the potential inability of the counterparty to fulfill its obligations under the terms
of the contract, the potential for an illiquid secondary market (making it difficult for the Fund to sell or terminate, including at favorable prices) and the potential for market movements which may expose the Fund
to gains or losses in excess of the amount shown in the Statement of Assets and Liabilities. The notional amounts of derivative instruments, if applicable, are not recorded in the financial statements.
A derivative instrument may suffer
a marked-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform its
obligations under the contract. The Fund’s risk of loss from counterparty credit risk on over-the-counter derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by
the Fund and the amount of any variation margin held by the counterparty, plus any replacement costs or related amounts. With exchange-traded or centrally cleared derivatives, there is reduced counterparty credit risk
to the Fund since the clearinghouse or central counterparty (CCP) provides some protection in the case of clearing member default. The clearinghouse or CCP stands between the buyer and the seller of the contract;
therefore, additional counterparty credit risk is failure of the clearinghouse or CCP. However, credit risk still exists in exchange-traded or centrally cleared derivatives with respect to initial and variation margin
that is held
| Variable Portfolio – U.S. Flexible Moderate Growth Fund | Semiannual Report 2020 | 17 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
in a broker’s customer account. While
brokers are required to segregate customer margin from their own assets, in the event that a broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin
held by the broker for all its clients, U.S. bankruptcy laws will typically allocate that shortfall on a pro-rata basis across all the broker’s customers (including the Fund), potentially resulting in losses to
the Fund.
In order to better define its
contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement)
or similar agreement with its derivatives contract counterparties. An ISDA Master Agreement is an agreement between the Fund and a counterparty that governs over-the-counter derivatives and typically contains, among
other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset with the counterparty
certain derivative instrument’s payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment
in the event of default (close-out netting), including the bankruptcy or insolvency of the counterparty. Note, however, that bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or
prohibitions against the right of offset or netting in bankruptcy, insolvency or other events.
Collateral (margin) requirements
differ by type of derivative. Margin requirements are established by the clearinghouse or CCP for exchange-traded and centrally cleared derivatives. Brokers can ask for margin in excess of the minimum in certain
circumstances. Collateral terms are contract specific for over-the-counter derivatives. For over-the-counter derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by
netting the marked-to-market amount for each transaction under such agreement and comparing that amount to the value of any variation margin currently pledged by the Fund and/or the counterparty. Generally, the amount
of collateral due from or to a party has to exceed a minimum transfer amount threshold (e.g., $250,000) before a transfer has to be made. To the extent amounts due to the Fund from its counterparties are not fully
collateralized, contractually or otherwise, the Fund bears the risk of loss from counterparty nonperformance. The Fund may also pay interest expense on cash collateral received from the broker. Any interest expense
paid by the Fund is shown on the Statement of Operations. The Fund attempts to mitigate counterparty risk by only entering into agreements with counterparties that it believes have the financial resources to honor
their obligations and by monitoring the financial stability of those counterparties.
Certain ISDA Master Agreements
allow counterparties of over-the-counter derivatives transactions to terminate derivatives contracts prior to maturity in the event the Fund’s net asset value declines by a stated percentage over a specified
time period or if the Fund fails to meet certain terms of the ISDA Master Agreement, which would cause the Fund to accelerate payment of any net liability owed to the counterparty. The Fund also has termination rights
if the counterparty fails to meet certain terms of the ISDA Master Agreement. In determining whether to exercise such termination rights, the Fund would consider, in addition to counterparty credit risk, whether
termination would result in a net liability owed from the counterparty.
For financial reporting purposes,
the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statement of Assets and Liabilities.
Futures contracts
Futures contracts are
exchange-traded and represent commitments for the future purchase or sale of an asset at a specified price on a specified date. The Fund bought and sold futures contracts to produce incremental earnings, to manage the
duration and yield curve exposure of the Fund versus the benchmark, to manage exposure to movements in interest rates, to manage exposure to the securities market and to maintain appropriate equity market exposure
while keeping sufficient cash to accommodate daily redemptions. These instruments may be used for other purposes in future periods. Upon entering into futures contracts, the Fund bears risks that it may not achieve
the anticipated benefits of the futures contracts and may realize a loss. Additional risks include counterparty credit risk, the possibility of an illiquid market, and that a change in the value of the contract or
option may not correlate with changes in the value of the underlying asset.
Upon entering into a futures
contract, the Fund deposits cash or securities with the broker, known as a futures commission merchant (FCM), in an amount sufficient to meet the initial margin requirement. The initial margin deposit must be
maintained at an established level over the life of the contract. Cash deposited as initial margin is recorded in the Statement of Assets and Liabilities as margin deposits. Securities deposited as initial margin are
designated in the Portfolio of Investments. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are
| 18 | Variable Portfolio – U.S. Flexible Moderate Growth Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
equal to the daily change in the contract value
and are recorded as variation margin receivable or payable and are offset in unrealized gains or losses. The Fund recognizes a realized gain or loss when the contract is closed or expires. Futures contracts involve,
to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities.
Options contracts
Options are contracts which entitle
the holder to purchase or sell securities or other identified assets at a specified price, or in the case of index option contracts, to receive or pay the difference between the index value and the strike price of the
index option contract. Option contracts can be either exchange-traded or over-the-counter. The Fund purchased option contracts to produce incremental earnings, to decrease the Fund’s exposure to equity market
risk and to increase return on investments and to facilitate buying and selling of securities for investments. These instruments may be used for other purposes in future periods. Completion of transactions for option
contracts traded in the over-the-counter market depends upon the performance of the other party. Cash collateral may be collected or posted by the Fund to secure certain over-the-counter option contract trades. Cash
collateral held or posted by the Fund for such option contract trades must be returned to the broker or the Fund upon closure, exercise or expiration of the contract.
Options contracts purchased are
recorded as investments. When the Fund writes an options contract, the premium received is recorded as an asset and an amount equivalent to the premium is recorded as a liability in the Statement of Assets and
Liabilities and is subsequently adjusted to reflect the current fair value of the option written. Changes in the fair value of the written option are recorded as unrealized appreciation or depreciation until the
contract is exercised or has expired. The Fund will realize a gain or loss when the option contract is closed or expires. When option contracts are exercised, the proceeds on sales for a written call or purchased put
option contract, or the purchase cost for a written put or purchased call option contract, is adjusted by the amount of premium received or paid.
For over-the-counter options
purchased, the Fund bears the risk of loss of the amount of the premiums paid plus the positive change in market values net of any collateral held by the Fund should the counterparty fail to perform under the
contracts. Option contracts written by the Fund do not typically give rise to significant counterparty credit risk, as options written generally obligate the Fund and not the counterparty to perform. The risk in
writing a call option contract is that the Fund gives up the opportunity for profit if the market price of the security increases above the strike price and the option contract is exercised. The risk in writing a put
option contract is that the Fund may incur a loss if the market price of the security decreases below the strike price and the option contract is exercised. Exercise of a written option could result in the Fund
purchasing or selling a security or foreign currency when it otherwise would not, or at a price different from the current market value. In purchasing and writing options, the Fund bears the risk of an unfavorable
change in the value of the underlying instrument or the risk that the Fund may not be able to enter into a closing transaction due to an illiquid market.
Swap contracts
Swap contracts are negotiated in
the over-the-counter market and may be entered into as a bilateral contract or centrally cleared (centrally cleared swap contract). In a centrally cleared swap contract, immediately following execution of the swap
contract with a broker, the swap contract is novated to a central counterparty (the CCP) and the CCP becomes the Fund’s counterparty to the centrally cleared swap contract. The Fund is required to deposit
initial margin with the futures commission merchant (FCM), which pledges it through to the CCP in the form of cash or securities in an amount that varies depending on the size and risk profile of the particular swap
contract. Securities deposited as initial margin are designated in the Portfolio of Investments and cash deposited is recorded in the Statement of Assets and Liabilities as margin deposits. Unlike a bilateral swap
contract, for centrally cleared swap contracts, the Fund has minimal credit exposure to the FCM because the CCP stands between the Fund and the relevant buyer/seller on the other side of the contract. Swap contracts
are marked-to-market daily and changes in value are recorded as unrealized appreciation (depreciation). The daily change in valuation of centrally cleared swap contracts, if any, is recorded as a receivable or payable
for variation margin in the Statement of Assets and Liabilities.
| Variable Portfolio – U.S. Flexible Moderate Growth Fund | Semiannual Report 2020 | 19 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Entering into these contracts
involves, to varying degrees, elements of interest, liquidity and counterparty credit risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that there
may be unfavorable changes in interest rates, market conditions or other conditions, that it may be difficult to initiate a swap transaction or liquidate a position at an advantageous time or price which may result in
significant losses, and that the FCM or CCP may not fulfill its obligation under the contract.
Credit default swap contracts
The Fund entered into credit
default swap contracts to increase or decrease its credit exposure to an index and to manage credit risk exposure. These instruments may be used for other purposes in future periods. Credit default swap contracts are
agreements in which one party pays fixed periodic payments to a counterparty in consideration for an agreement from the counterparty to make a specific payment should a specified credit event(s) take place. Although
specified credit events are contract specific, credit events are generally defined as bankruptcy, failure to pay, restructuring, obligation acceleration, obligation default, or repudiation/moratorium.
As the purchaser of a credit
default swap contract, the Fund purchases protection by paying a periodic interest rate on the notional amount to the counterparty. The interest amount is accrued daily as a component of unrealized appreciation
(depreciation) and is recorded as a realized loss upon payment. If a credit event as specified in the contract occurs, the Fund may have the option either to deliver the reference obligation to the seller in exchange
for a cash payment of its par amount, or to receive a net cash settlement equal to the par amount less an agreed-upon value of the reference obligation as of the date of the credit event. The difference between the
value of the obligation or cash delivered and the notional amount received will be recorded as a realized gain (loss).
As the seller of a credit default
swap contract, the Fund sells protection to a buyer and will generally receive a periodic interest rate on a notional amount. The interest amount is accrued daily as a component of unrealized appreciation
(depreciation) and is recorded as a realized gain upon receipt of the payment. If a credit event as specified in the contract with the counterparty occurs, the Fund may either be required to accept the reference
obligation from the buyer in exchange for a cash payment of its notional amount, or to pay the buyer a net cash settlement equal to the notional amount less an agreed-upon value of the reference obligation (recovery
value) as of the date of the credit event. The difference between the value of the obligation or cash received and the notional amount paid will be recorded as a realized gain (loss). The maximum potential amount of
undiscounted future payments the Fund could be required to make as the seller of protection under a credit default swap contract is equal to the notional amount of the reference obligation. These potential amounts may
be partially offset by any recovery values of the respective reference obligations or upfront receipts upon entering into the agreement. The notional amounts and market values of all credit default swap contracts in
which the Fund is the seller of protection, if any, are disclosed in the Credit Default Swap Contracts Outstanding schedule following the Portfolio of Investments.
As a protection seller, the Fund
bears the risk of loss from the credit events specified in the contract with the counterparty. For credit default swap contracts on credit indices, quoted market prices and resulting market values serve as an
indicator of the current status of the payment/performance risk. Increasing market values, in absolute terms when compared to the notional amount of the swap, represent a deterioration of the reference entity’s
credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the contract.
Any upfront payments or receipts by
the Fund upon entering into a credit default swap contract is recorded as an asset or liability, respectively, and amortized daily as a component of realized gain (loss) in the Statement of Operations. Credit default
swap contracts are valued daily, and the change in value is recorded as unrealized appreciation (depreciation) until the termination of the swap, at which time a realized gain (loss) is recorded.
Credit default swap contracts can
involve greater risks than if a fund had invested in the reference obligation directly since, in addition to general market risks, credit default swaps are subject to counterparty credit risk, leverage risk, hedging
risk, correlation risk and liquidity risk.
| 20 | Variable Portfolio – U.S. Flexible Moderate Growth Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Effects of derivative transactions in
the financial statements
The following tables are intended
to provide additional information about the effect of derivatives on the financial statements of the Fund, including: the fair value of derivatives by risk category and the location of those fair values in the
Statement of Assets and Liabilities; and the impact of derivative transactions over the period in the Statement of Operations, including realized and unrealized gains (losses). The derivative instrument schedules
following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any.
The following table is a summary of
the fair value of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) at June 30, 2020:
| Asset derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Credit risk | Component of trust capital — unrealized appreciation on swap contracts | 1,704,731* |
| Equity risk | Component of trust capital — unrealized appreciation on futures contracts | 1,815,186* |
| Equity risk | Investments, at value — Options Purchased | 17,661,930 |
| Interest rate risk | Component of trust capital — unrealized appreciation on futures contracts | 746,047* |
| Total | 21,927,894 |
| Liability derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Equity risk | Component of trust capital - unrealized depreciation on futures contracts | 10,687,531* |
| Interest rate risk | Component of trust capital - unrealized depreciation on futures contracts | 136,504* |
| Total | 10,824,035 |
| * | Includes cumulative appreciation (depreciation) as reported in the tables following the Portfolio of Investments. Only the current day’s variation margin is reported in receivables or payables in the Statement of Assets and Liabilities. |
The following table indicates the
effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) in the Statement of Operations for the six months ended June 30, 2020:
| Amount of realized gain (loss) on derivatives recognized in income | ||||
| Risk exposure category | Futures contracts ($) | Options contracts purchased ($) | Swap contracts ($) | Total ($) |
| Credit risk | — | — | 276,767 | 276,767 |
| Equity risk | (117,546,280) | 48,258,758 | — | (69,287,522) |
| Interest rate risk | 10,202,869 | — | — | 10,202,869 |
| Total | (107,343,411) | 48,258,758 | 276,767 | (58,807,886) |
| Change in unrealized appreciation (depreciation) on derivatives recognized in income | ||||
| Risk exposure category | Futures contracts ($) | Options contracts purchased ($) | Swap contracts ($) | Total ($) |
| Credit risk | — | — | 1,704,731 | 1,704,731 |
| Equity risk | (20,404,716) | 6,293,636 | — | (14,111,080) |
| Interest rate risk | 1,339,652 | — | — | 1,339,652 |
| Total | (19,065,064) | 6,293,636 | 1,704,731 | (11,066,697) |
| Variable Portfolio – U.S. Flexible Moderate Growth Fund | Semiannual Report 2020 | 21 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
The following table is a summary
of the average outstanding volume by derivative instrument for the six months ended June 30, 2020:
| Derivative instrument | Average notional amounts ($)* |
| Futures contracts — long | 546,608,749 |
| Futures contracts — short | 386,610,790 |
| Credit default swap contracts — sell protection | 102,500,000 |
| Derivative instrument | Average value ($)* |
| Options contracts — purchased | 16,355,715 |
| * | Based on the ending quarterly outstanding amounts for the six months ended June 30, 2020. |
Asset- and mortgage-backed
securities
The Fund may invest in asset-backed
and mortgage-backed securities. The maturity dates shown represent the original maturity of the underlying obligation. Actual maturity may vary based upon prepayment activity on these obligations. All, or a portion,
of the obligation may be prepaid at any time because the underlying asset may be prepaid. As a result, decreasing market interest rates could result in an increased level of prepayment. An increased prepayment rate
will have the effect of shortening the maturity of the security. Unless otherwise noted, the coupon rates presented are fixed rates.
Delayed delivery securities
The Fund may trade securities on
other than normal settlement terms, including securities purchased or sold on a “when-issued” or "forward commitment" basis. This may increase risk to the Fund since the other party to the transaction may
fail to deliver, which could cause the Fund to subsequently invest at less advantageous prices. The Fund designates cash or liquid securities in an amount equal to the delayed delivery commitment.
To be announced securities
The Fund may trade securities on a
To Be Announced (TBA) basis. As with other delayed-delivery transactions, a seller agrees to issue a TBA security at a future date. However, the seller does not specify the particular securities to be delivered.
Instead, the Fund agrees to accept any security that meets specified terms.
In some cases, Master Securities
Forward Transaction Agreements (MSFTAs) may be used to govern transactions of certain forward-settling agency mortgage-backed securities, such as delayed-delivery and TBAs, between the Fund and counterparty. The MSFTA
maintains provisions for, among other things, initiation and confirmation, payment and transfer, events of default, termination, and maintenance of collateral relating to such transactions.
Mortgage dollar roll transactions
The Fund may enter into mortgage
“dollar rolls” in which the Fund sells securities for delivery in the current month and simultaneously contracts with the same counterparty to repurchase similar but not identical securities (same type,
coupon and maturity) on a specified future date. During the roll period, the Fund loses the right to receive principal and interest paid on the securities sold. However, the Fund will benefit because it receives
negotiated amounts in the form of reductions of the purchase price for the future purchase plus the interest earned on the cash proceeds of the securities sold until the settlement date of the forward purchase. The
Fund records the incremental difference between the forward purchase and sale of each forward roll as a realized gain or loss. Unless any realized gains exceed the income, capital appreciation, and gain or loss due to
mortgage prepayments that would have been realized on the securities sold as part of the mortgage dollar roll, the use of this technique will diminish the investment performance of the Fund compared to what the
performance would have been without the use of mortgage dollar rolls. All cash proceeds will be invested in instruments that are permissible investments for the Fund. The Fund identifies cash or liquid securities in
an amount equal to the forward purchase price.
| 22 | Variable Portfolio – U.S. Flexible Moderate Growth Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
For financial reporting and tax
purposes, the Fund treats “to be announced” mortgage dollar rolls as two separate transactions, one involving the purchase of a security and a separate transaction involving a sale. These transactions may
increase the Fund’s portfolio turnover rate. The Fund does not currently enter into mortgage dollar rolls that are accounted for as financing transactions.
Mortgage dollar rolls involve the
risk that the market value of the securities the Fund is obligated to repurchase may decline below the repurchase price, or that the counterparty may default on its obligations.
Offsetting of assets and
liabilities
The following table presents the
Fund’s gross and net amount of assets and liabilities available for offset under netting arrangements as well as any related collateral received or pledged by the Fund as of June 30, 2020:
| JPMorgan ($) | Morgan Stanley ($) | Total ($) | |
| Assets | |||
| Centrally cleared credit default swap contracts (a) | - | 173,883 | 173,883 |
| Options purchased puts | 17,661,930 | - | 17,661,930 |
| Total assets | 17,661,930 | 173,883 | 17,835,813 |
| Total financial and derivative net assets | 17,661,930 | 173,883 | 17,835,813 |
| Total collateral received (pledged) (c) | - | - | - |
| Net amount (d) | 17,661,930 | 173,883 | 17,835,813 |
| (a) | Centrally cleared swaps are included within payable/receivable for variation margin on the Statement of Assets and Liabilities. |
| (b) | In some instances, the actual collateral received and/or pledged may be more than the amount shown due to overcollateralization. |
| (c) | Represents the net amount due from/(to) counterparties in the event of default. |
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Interest income is recorded on an
accrual basis. Market premiums and discounts, including original issue discounts, are amortized and accreted, respectively, over the expected life of the security on all debt securities, unless otherwise noted. The
Fund classifies gains and losses realized on prepayments received on mortgage-backed securities as adjustments to interest income.
The Fund may place a debt security
on non-accrual status and reduce related interest income when it becomes probable that the interest will not be collected and the amount of uncollectible interest can be reasonably estimated. A defaulted debt security
is removed from non-accrual status when the issuer resumes interest payments or when collectibility of interest is reasonably assured.
Corporate actions and dividend
income are recorded on the ex-dividend date.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a
proportionate change in return of capital to shareholders.
| Variable Portfolio – U.S. Flexible Moderate Growth Fund | Semiannual Report 2020 | 23 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
Income and capital gain
distributions from the Underlying Funds, if any, are recorded on the ex-dividend date.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund is treated as a
partnership for federal income tax purposes, and the Fund does not expect to make regular distributions. The Fund will not be subject to federal income tax, and therefore, there is no provision for federal income
taxes. The partners of the Fund are subject to tax on their distributive share of the Fund’s income and loss. The components of the Fund’s net assets are reported at the partner-level for federal income
tax purposes, and therefore, are not presented in the Statement of Assets and Liabilities.
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees and
underlying fund fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager). Under the Management Agreement, the Investment Manager provides the Fund with investment research and advice, as well as
administrative and accounting services. The management services fee is an annual fee that is a blend of (i) 0.02% on assets invested in affiliated underlying funds (including exchange-traded funds and closed-end
funds) that pay a management services fee (or investment advisory services fee, as applicable) to the Investment Manager and (ii) a fee that declines from 0.72% to 0.52%, depending on asset levels, on assets
invested in securities (other than affiliated underlying funds (including exchange-traded funds and closed-end funds) that pay a management services fee (or investment advisory services fee, as applicable) to the
Investment Manager) including other funds advised by the Investment Manager that do not pay a management services fee to the Investment Manager, third party funds, derivatives and individual securities. The annualized
effective management services fee rate for the six months ended June 30, 2020 was 0.22% of the Fund’s average daily net assets.
| 24 | Variable Portfolio – U.S. Flexible Moderate Growth Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
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 expense and fee
levels and the Fund may own different proportions of Underlying Funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. These expenses are not reflected in the expenses
shown in Statement of Operations and are not included in the ratios to average net assets shown in the Financial Highlights.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. These members of the Board of Trustees
may participate in a Deferred Compensation Plan (the Deferred Plan) which may be terminated at any time. Obligations of the Deferred Plan will be paid solely out of the Fund’s assets, and all amounts payable
under the Deferred Plan constitute a general unsecured obligation of the Fund.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The annualized
effective service fee rate for the six months ended June 30, 2020, was 0.06% of the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. The Board of Trustees has approved, and the Fund has adopted, a distribution plan
(the Plan) which sets the distribution fees for the Fund. These fees are calculated daily and are intended to compensate the Distributor for selling shares of the Fund. The Fund pays a monthly distribution fee to the
Distributor at the maximum annual rate of 0.25% of the average daily net assets attributable to Class 2 shares of the Fund. The Fund pays no distribution and service fees for Class 1 shares.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, including indirect expenses of the Underlying Funds, after giving effect to fees waived/expenses reimbursed and any balance credits
and/or overdraft charges from the Fund’s custodian, do not exceed the following annual rate(s) as a percentage of the class’ average daily net assets:
| May 1, 2020 through April 30, 2021 | Prior to May 1, 2020 | |
| Class 1 | 0.80% | 0.85% |
| Class 2 | 1.05 | 1.10 |
| Variable Portfolio – U.S. Flexible Moderate Growth Fund | Semiannual Report 2020 | 25 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), transaction costs and brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program
fees and expenses, transaction charges and interest on borrowed money, interest, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This
agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements
described above are not recoverable by the Investment Manager or its affiliates in future periods.
Note 4. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $1,910,326,573 and $1,397,666,109, respectively, for the six months ended June 30, 2020, of which
$1,672,567,506 and $1,260,773,891, respectively, were U.S. government securities. The amount of purchase and sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 5. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes referred to
as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 6. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund did not borrow or lend
money under the Interfund Program during the six months ended June 30, 2020.
Note 7. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by Citibank, N.A., HSBC Bank USA, N.A. and JPMorgan Chase Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. The credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment Manager or an affiliated investment manager, severally and
not jointly, permits collective borrowings up to $1 billion. Interest is charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the
one-month LIBOR rate and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a
commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The commitment fee is included in other expenses in the Statement of Operations. This agreement
expires annually in December unless extended or renewed.
The Fund had no borrowings during
the six months ended June 30, 2020.
| 26 | Variable Portfolio – U.S. Flexible Moderate Growth Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Note 8. Significant
risks
Credit risk
Credit risk is the risk that the
value of debt instruments in the Fund’s portfolio may decline because the issuer defaults or otherwise becomes unable or unwilling, or is perceived to be unable or unwilling, to honor its financial obligations,
such as making payments to the Fund when due. Credit rating agencies assign credit ratings to certain debt instruments to indicate their credit risk. Lower rated or unrated debt instruments held by the Fund may
present increased credit risk as compared to higher-rated debt instruments.
Derivatives risk
Losses involving derivative
instruments may be substantial, because a relatively small movement in the underlying reference (which is generally the price, rate or other economic indicator associated with a security(ies), commodity, currency or
index or other instrument or asset) may result in a substantial loss for the Fund. In addition to the potential for increased losses, the use of derivative instruments may lead to increased volatility within the Fund.
Derivatives will typically increase the Fund’s exposure to principal risks to which it is otherwise exposed, and may expose the Fund to additional risks, including correlation risk, counterparty risk, hedging
risk, leverage risk, liquidity risk and pricing risk.
Interest rate risk
Interest rate risk is the risk of
losses attributable to changes in interest rates. In general, if prevailing interest rates rise, the values of debt securities tend to fall, and if interest rates fall, the values of debt securities tend to rise.
Actions by governments and central banking authorities can result in increases in interest rates. Increasing interest rates may negatively affect the value of debt securities held by the Fund, resulting in a negative
impact on the Fund’s performance and net asset value per share. In general, the longer the maturity or duration of a debt security, the greater its sensitivity to changes in interest rates. The Fund is subject
to the risk that the income generated by its investments may not keep pace with inflation.
Liquidity risk
Liquidity risk is the risk
associated with a lack of marketability of investments which may make it difficult to sell the investment at a desirable time or price. Changing regulatory, market or other conditions or environments (for example, the
interest rate or credit environments) may adversely affect the liquidity of the Fund’s investments. The Fund may have to accept a lower selling price for the holding, sell other investments, or forego another,
more appealing investment opportunity. Generally, the less liquid the market at the time the Fund sells a portfolio investment, the greater the risk of loss or decline of value to the Fund. A less liquid market can
lead to an increase in Fund redemptions, which may negatively impact Fund performance and net asset value per share, including, for example, if the Fund is forced to sell securities in a down market.
Market and environment risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The Fund performance may also be
significantly negatively impacted by the economic impact of the coronavirus disease 2019 (COVID-19) pandemic. Public health crisis has become a pandemic that has resulted in, and may continue to result in, significant
global economic and societal disruption and market volatility due to disruptions in market access, resource availability, facilities operations, imposition of tariffs, export controls and supply chain disruption,
among others. Such
| Variable Portfolio – U.S. Flexible Moderate Growth Fund | Semiannual Report 2020 | 27 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
disruptions may be caused, or exacerbated by,
quarantines and travel restrictions, workforce displacement and loss in human and other resources. The uncertainty surrounding the magnitude, duration, reach, costs and effects of the global pandemic, as well as
actions that have been or could be taken by governmental authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as the uncertainty over impacts to come, of COVID-19 –
and any other infectious illness outbreaks, epidemics and pandemics that may arise in the future – could negatively affect global economies and markets in ways that cannot necessarily be foreseen. In addition,
the impact of infectious illness outbreaks and epidemics in emerging market countries may be greater due to generally less established healthcare systems, governments and financial markets. Public health crises caused
by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The disruptions caused by COVID-19 could prevent the Fund from executing advantageous
investment decisions in a timely manner and negatively impact the Fund’s ability to achieve their investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of
the Fund.
The Investment Manager and its
affiliates have systematically implemented strategies to address the operating environment spurred by the COVID-19 pandemic. To promote the safety and security of our employees and to assure the continuity of our
business operations, we have implemented a work from home protocol for virtually all of our employee population, restricted business travel, and provided resources for complying with the guidance from the World Health
Organization, the U.S. Centers for Disease Control and governments. Our operations teams seek to operate without significant disruptions in service. Our pandemic strategy takes into consideration that a pandemic could
be widespread and may occur in multiple waves, affecting different communities at different times with varying levels of severity. We cannot, however, predict the impact that natural or man-made disasters, including
the COVID-19 pandemic, may have on the ability of our employees and third-party service providers to continue ordinary business operations and technology functions over near- or longer-term periods.
Mortgage- and other asset-backed
securities risk
The value of any mortgage-backed
and other asset-backed securities including collateralized debt obligations, if any, held by the Fund may be affected by, among other things, changes or perceived changes in: interest rates; factors concerning the
interests in and structure of the issuer or the originator of the mortgages or other assets; the creditworthiness of the entities that provide any supporting letters of credit, surety bonds or other credit enhancements;
or the market’s assessment of the quality of underlying assets. Payment of principal and interest on some mortgage-backed securities (but not the market value of the securities themselves) may be guaranteed by
the full faith and credit of a particular U.S. Government agency, authority, enterprise or instrumentality, and some, but not all, are also insured or guaranteed by the U.S. Government. Mortgage-backed securities
issued by non-governmental issuers (such as commercial banks, savings and loan institutions, private mortgage insurance companies, mortgage bankers and other secondary market issuers) may entail greater risk than
obligations guaranteed by the U.S. Government. Mortgage- and other asset-backed securities are subject to liquidity risk and prepayment risk. A decline or flattening of housing values may cause delinquencies in
mortgages (especially sub-prime or non-prime mortgages) underlying mortgage-backed securities and thereby adversely affect the ability of the mortgage-backed securities issuer to make principal and/or interest
payments to mortgage-backed securities holders, including the Fund. Rising or high interest rates tend to extend the duration of mortgage- and other asset-backed securities, making their prices more volatile and more
sensitive to changes in interest rates.
Shareholder concentration risk
At June 30, 2020, affiliated
shareholders of record owned 100.0% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 9. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
| 28 | Variable Portfolio – U.S. Flexible Moderate Growth Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Note 10. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial.
| Variable Portfolio – U.S. Flexible Moderate Growth Fund | Semiannual Report 2020 | 29 |
Liquidity Risk
Management Program
Pursuant to Rule 22e-4 under the
1940 Act, the Fund has adopted a liquidity risk management program (Program). The Program’s principal objectives include assessing, managing and periodically reviewing the Fund’s liquidity risk. Liquidity
risk is defined as the risk that the Fund could not meet redemption requests without significant dilution of remaining investors’ interests in the Fund.
The Board has appointed the
Investment Manager as the program administrator for the Fund’s Program. The Investment Manager has delegated oversight of the Program to its Liquidity Risk Management Committee (the Committee). At a board
meeting during the fiscal period, the Committee provided the Board with a report addressing the operations of the program and assessing its adequacy and effectiveness of implementation for the period December 1, 2018,
through December 31, 2019, including:
| • | the Fund had sufficient liquidity to both meet redemptions and operate effectively on behalf of shareholders; |
| • | there were no material changes to the Program during the period; |
| • | the implementation of the Program was effective to manage the Fund’s liquidity risk; and |
| • | the Program operated adequately during the period. |
There can be no assurance that the
Program will achieve its objectives in the future. Please refer to the Fund’s prospectus for more information regarding the Fund’s exposure to liquidity risk and other principal risks to which an
investment in the Fund may be subject.
Board Consideration
and Approval of Management
Agreement
On June 17, 2020, the Board of
Trustees (the Board) and the Trustees who are not interested persons (as defined in the Investment Company Act of 1940) (the Independent Trustees) of Columbia Funds Variable Insurance Trust (the Trust) unanimously
approved the continuation of the Management Agreement (the Management Agreement) with Columbia Management Investment Advisers, LLC (the Investment Manager) with respect to Variable Portfolio – U.S. Flexible
Moderate Growth Fund (the Fund), a series of the Trust. As detailed below, the Board’s Advisory Fees and Expenses Committee (the Committee) and the Board met on multiple occasions to review and discuss, among
themselves, with the management team of the Investment Manager and with an independent fee consultant, materials provided by the Investment Manager, the independent fee consultant and others before determining to
approve the continuation of the Management Agreement.
In connection with their
deliberations regarding the continuation of the Management Agreement, the Committee and the Board evaluated materials requested from the Investment Manager regarding the Fund and the Management Agreement, and
discussed these materials with representatives of the Investment Manager at Committee meetings held on March 10, 2020, April 30, 2020 and June 17, 2020 and at Board meetings held on March 11, 2020 and June 17, 2020.
In addition, the Board and its various committees consider matters bearing on the Management Agreement at other meetings throughout the year and in prior years and meet regularly with senior management of the Trust
and the Investment Manager. Through the Board’s Investment Oversight Committees, Trustees also meet with selected portfolio managers of the funds the Trustees oversee and with other investment personnel at
various times throughout the year. The Committee and the Board also consulted with the independent fee consultant, Fund counsel and the Independent Trustees’ independent legal counsel, who advised on various
matters with respect to the Committee’s and the Board’s considerations and otherwise assisted the Committee and the Board in their deliberations. On June 17, 2020, the Committee recommended that the Board
approve the continuation of the Management Agreement. On June 17, 2020, the Board, including the Independent Trustees, voting separately, unanimously approved the continuation of the Management Agreement for the
Fund.
| 30 | Variable Portfolio – U.S. Flexible Moderate Growth Fund | Semiannual Report 2020 |
Board Consideration and Approval of
Management
Agreement (continued)
The Committee and the Board considered all
information that they, their legal counsel or the Investment Manager believed reasonably necessary to evaluate and to determine whether to recommend for approval or approve the continuation of the Management
Agreement. The information and factors considered by the Committee and the Board in recommending for approval or approving the continuation of the Management Agreement for the Fund included the following:
| • | Information on the investment performance of the Fund relative to the performance of a group of mutual funds determined to be comparable to the Fund by the Investment Manager, as well as performance relative to benchmarks; |
| • | Information on the Fund’s management fees and total expenses, including information comparing the Fund’s expenses to those of a group of comparable mutual funds, as determined by the Investment Manager; |
| • | The Investment Manager’s agreement to contractually limit or cap total operating expenses for the Fund through April 30, 2021 so that total operating expenses (excluding certain fees and expenses, such as transaction costs and certain other investment related expenses, interest, taxes, and infrequent and/or unusual expenses) would not exceed a specified annual rate, as a percentage of the Fund’s net assets; |
| • | The terms and conditions of the Management Agreement; |
| • | The current and proposed terms and conditions of other agreements and arrangements with affiliates of the Investment Manager relating to the operations of the Fund, including agreements with respect to the provision of distribution, transfer agency and shareholder services to the Fund; |
| • | Descriptions of various functions performed by the Investment Manager under the Management Agreement, including portfolio management and portfolio trading practices; |
| • | Information regarding any recently negotiated management fees of similarly-managed portfolios of other institutional clients of the Investment Manager; |
| • | Information regarding the reputation, regulatory history and resources of the Investment Manager, including information regarding senior management, portfolio managers and other personnel; |
| • | Information regarding the capabilities of the Investment Manager with respect to compliance monitoring services, including an assessment of the Investment Manager’s compliance system by the Fund’s Chief Compliance Officer; and |
| • | The profitability to the Investment Manager and its affiliates from their relationships with the Fund. |
Nature, extent and quality of
services provided under the Management Agreement
The Committee and the Board
considered the nature, extent and quality of services provided to the Fund by the Investment Manager and its affiliates under the Management Agreement and under separate agreements for the provision of transfer agency
and shareholder services, and the resources dedicated to the Fund and the other Columbia Funds by the Investment Manager and its affiliates. The Committee and the Board considered, among other things, the Investment
Manager’s ability to attract, motivate and retain highly qualified research, advisory and supervisory investment professionals (including compensation programs for personnel involved in fund management,
reputation and other attributes), the portfolio management services provided by those investment professionals, and the quality of the Investment Manager’s investment research capabilities and trade execution
services. The Committee and the Board also considered the potential benefits to shareholders of investing in a mutual fund that is part of a fund complex offering exposure to a variety of asset classes and investment
disciplines and providing a variety of fund and shareholder services.
The Committee and the Board also
considered the professional experience and qualifications of the senior personnel of the Investment Manager, which included consideration of the Investment Manager’s experience with funds using an investment
strategy similar to that used by the Investment Manager for the Fund. The Committee and the Board noted the compliance programs of and the compliance-related resources provided to the Fund by the Investment Manager
and its affiliates and the resources dedicated by the Investment Manager and its affiliates to risk management, and considered the Investment Manager’s ability to provide administrative services to the Fund and
coordinate the activities of the Fund’s other service
| Variable Portfolio – U.S. Flexible Moderate Growth Fund | Semiannual Report 2020 | 31 |
Board Consideration and Approval of
Management
Agreement (continued)
providers. After reviewing these and related
factors, the Committee and the Board concluded, within the context of their overall conclusions, that the nature, extent and quality of the services provided to the Fund under the Management Agreement supported the
continuation of the Management Agreement.
Investment performance
The Committee and the Board
reviewed information about the performance of the Fund over various time periods, including performance information relative to benchmarks, information that compared the performance of the Fund to the performance of a
group of comparable mutual funds as determined by the Investment Manager, and information and analysis provided by the independent fee consultant. The Committee and the Board also reviewed a description of the
Investment Manager’s methodology for identifying the Fund’s peer groups for purposes of performance and expense comparisons.
The Committee and the Board noted
that, through December 31, 2019, the Fund’s performance was in the forty-ninth and fourteenth percentile (where the best performance would be in the first percentile) of its category selected by the Investment
Manager for the purposes of performance comparisons for the one- and three-year periods, respectively.
The Committee and the Board also
considered the Investment Manager’s performance and reputation generally, the Investment Manager’s historical responsiveness to Board concerns about performance, and the Investment Manager’s
willingness to take steps intended to improve performance. After reviewing these and related factors, the Committee and the Board concluded, within the context of their overall conclusions, that the performance of the
Fund and the Investment Manager was sufficient, in light of other considerations, to support the continuation of the Management Agreement.
Investment management fee rates
and other expenses
The Committee and the Board
considered the management fees charged to the Fund under the Management Agreement as well as the total expenses incurred by the Fund. In assessing the reasonableness of the fees under the Management Agreement, the
Committee and the Board considered, among other information, the Fund’s total expense ratio as a percentage of average daily net assets. The Committee and the Board considered data provided by the Investment
Manager and the independent fee consultant. The Committee and the Board noted that, as of December 31, 2019, the Fund’s actual management fee and net total expense ratio were ranked in the third and second
quintiles, respectively, (where the lowest fees and expenses would be in the first quintile) against the Fund’s expense universe as determined by the Investment Manager for purposes of expense comparison. The
Committee and the Board also took into account the fee waiver and expense limitation arrangements agreed to by the Investment Manager, as noted above.
The Committee and the Board also
received and considered information about the management fees charged by the Investment Manager to institutional accounts. In considering the fees charged to those accounts, the Committee and the Board took into
account, among other things, the Investment Manager’s representations about the differences between managing mutual funds as compared to other types of accounts, including differences in the services provided,
differences in the risk profile of such business for the Investment Manager and the additional resources required to manage mutual funds effectively. The Committee and the Board also received and considered
information about the fees charged by the Investment Manager for sub-advisory services it provides to comparable unaffiliated funds. In evaluating the Fund’s management fees, the Committee and the Board also
took into account the demands, complexity and quality of the investment management of the Fund.
After reviewing these and related
factors, the Committee and the Board concluded, within the context of their overall conclusions, that the management fee rates and expenses of the Fund, in light of other considerations, supported the continuation of
the Management Agreement.
Costs of services provided and
profitability
The Committee and the Board also
took note of the costs the Investment Manager and its affiliates incur in connection with the services provided and the profitability to the Investment Manager and its affiliates from their relationships with the
Fund, and the efforts undertaken by the Investment Manager and its affiliates to manage efficiently their costs to provide such services.
| 32 | Variable Portfolio – U.S. Flexible Moderate Growth Fund | Semiannual Report 2020 |
Board Consideration and Approval of
Management
Agreement (continued)
The Committee and the Board also considered the
compensation directly or indirectly received by the Investment Manager’s affiliates in connection with their relationships with the Fund. The Committee and the Board reviewed information provided by management
as to the profitability to the Investment Manager and its affiliates of their relationships with the Fund, information about the allocation of expenses used to calculate profitability, and comparisons of profitability
levels realized in 2019 to profitability levels realized in 2018. When reviewing profitability, the Committee and the Board also considered court cases in which adviser profitability was an issue in whole or in part,
the performance of similarly managed funds, the performance of the Fund, and the expense ratio of the Fund. In addition, the Committee and the Board considered information provided by the Investment Manager regarding
the Investment Manager’s financial condition and comparing its profitability to that of other asset management firms that are, or are subsidiaries of, publicly traded companies. In this regard, the Committee and
the Board also considered data provided by the independent fee consultant.
After reviewing these and related
factors, the Committee and the Board concluded, within the context of their overall conclusions, that the costs of services provided and the profitability to the Investment Manager and its affiliates from their
relationships with the Fund supported the continuation of the Management Agreement.
Economies of scale
The Committee and the Board
considered the potential existence of economies of scale in the provision by the Investment Manager of services to the Fund, to groups of related funds, and to the Investment Manager’s investment advisory
clients as a whole, and whether those economies of scale were shared with the Fund through breakpoints in investment management fees or other means, such as expense limitation arrangements and additional investments
by the Investment Manager in investment, trading, compliance and other resources. The Committee and the Board noted that the management fee schedules for the Fund contained breakpoints that would reduce the fee rate
on assets above specified threshold levels.
In considering these matters, the
Committee and the Board also considered the costs of the services provided and the profitability to the Investment Manager and its affiliates from their relationships with the Fund, as noted above. After reviewing
these and related factors, the Committee and the Board concluded, within the context of their overall conclusions, that the extent to which any economies of scale were expected to be shared with the Fund supported the
continuation of the Management Agreement.
Other benefits to the Investment
Manager
The Committee and the Board
received and considered information regarding “fall-out” or ancillary benefits received by the Investment Manager and its affiliates as a result of their relationships with the Fund, such as the engagement
of the Investment Manager’s affiliates to provide distribution, transfer agency and shareholder services to the Fund. In this regard, among other matters, the Committee and the Board considered that the
Fund’s distributor retains a portion of the distribution fees from the Fund. The Committee and the Board also considered the benefits of research made available to the Investment Manager by reason of brokerage
commissions generated by the Fund’s securities transactions, and reviewed information about the Investment Manager’s practices with respect to considering brokerage and research services when allocating
portfolio transactions. In this connection, the Board also noted that the amount of research made available to the Investment Manager by reason of brokerage commissions had been declining over time, and may decline
further. The Committee and the Board also considered the tax benefits provided to affiliates of the Investment Manager as a result of the election by certain Funds to be taxed as partnerships. The Committee and the
Board recognized that the Investment Manager’s profitability would be somewhat lower without these benefits.
Conclusion
The Committee and the Board
reviewed all of the above considerations in reaching their decisions to recommend or approve the continuation of the Management Agreement. In their deliberations, the Trustees did not identify any particular
information that was all-important or controlling, and individual Trustees may have attributed different weights to the various factors. Based on their evaluation of all factors that they deemed to be material,
including those factors described above, and assisted by the advice of independent legal counsel, the Board, including the Independent Trustees, voting separately, unanimously approved the continuation of the
Management Agreement.
| Variable Portfolio – U.S. Flexible Moderate Growth Fund | Semiannual Report 2020 | 33 |
Results of Meeting of
Shareholders
At a Joint Special Meeting of
Shareholders held on April 16, 2020, shareholders of Columbia Funds Variable Insurance Trust elected each of the ten nominees for the trustees to the Board of Trustees of Columbia Funds Variable Insurance Trust, each
to hold office until he or she dies, resigns or is removed or, if sooner, until the next meeting of shareholders called for the purpose of electing trustees and until the election and qualification of his or her
successor, as follows:
| Trustee | Votes For | Votes Withheld | Abstentions |
| Janet L. Carrig | 26,231,108,809 | 1,129,334,152 | 0 |
| J. Kevin Connaughton | 26,249,644,638 | 1,110,798,323 | 0 |
| Olive Darragh | 26,323,990,658 | 1,036,452,304 | 0 |
| Douglas A. Hacker | 26,255,762,920 | 1,104,680,042 | 0 |
| Nancy T. Lukitsh | 26,332,381,722 | 1,028,061,240 | 0 |
| David M. Moffett | 26,252,719,395 | 1,107,723,567 | 0 |
| John J. Neuhauser | 26,222,694,456 | 1,137,748,505 | 0 |
| Christopher O. Petersen | 26,265,703,212 | 1,094,739,749 | 0 |
| Patrick J. Simpson | 26,222,908,024 | 1,137,534,938 | 0 |
| Natalie A. Trunow | 26,340,164,732 | 1,020,278,229 | 0 |
| 34 | Variable Portfolio – U.S. Flexible Moderate Growth Fund | Semiannual Report 2020 |
[THIS PAGE INTENTIONALLY LEFT
BLANK]
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 225 Franklin Street, Boston, MA
02110-2804
© 2020 Columbia Management Investment
Advisers, LLC.
S-2021 AP (8/20)
Variable Portfolio
– Managed Risk Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts offered by the separate accounts of participating insurance companies as well as qualified pension and
retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
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| 5 | |
| 6 | |
| 10 | |
| 11 | |
| 12 | |
| 14 | |
| 16 | |
| 30 | |
| 30 | |
| 34 |
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which Variable Portfolio – Managed Risk Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You
may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov. Information regarding
how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge by visiting
columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT, and for reporting periods ended prior to March 31, 2019, on Form N-Q. The Fund’s Form N-Q and Form N-PORT
filings are available on the SEC’s website at sec.gov. The Fund’s complete schedule of portfolio holdings, as filed on Form N-Q or Form N-PORT, can also be obtained without charge, upon request, by calling
800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
225 Franklin Street
Boston, MA 02110
Fund distributor
Columbia Management Investment Distributors,
Inc.
225 Franklin Street
Boston, MA 02110
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Variable Portfolio – Managed Risk
Fund | Semiannual Report 2020
Fund at a Glance
(Unaudited)
(Unaudited)
Investment objective
The Fund
pursues total return while seeking to manage the Fund’s exposure to equity market volatility.
Portfolio management
Brian Virginia
Lead Portfolio Manager
Managed Fund since 2017
Anwiti Bahuguna, Ph.D.
Portfolio Manager
Managed Fund since 2017
David Weiss, CFA
Portfolio Manager
Managed Fund since 2017
Joshua Kutin, CFA
Portfolio Manager
Managed Fund since 2018
| Variable Portfolio – Managed Risk Fund | Semiannual Report 2020 | 3 |
Fund at a Glance (continued)
(Unaudited)
(Unaudited)
| Portfolio Allocation (%) (at June 30, 2020) | |
| Allocations to Underlying Funds | |
| Equity Funds | 49.9 |
| International | 15.4 |
| U.S. Large Cap | 30.6 |
| U.S. Small Cap | 3.9 |
| Exchange-Traded Fixed Income Funds | 8.7 |
| Investment Grade | 8.7 |
| Fixed Income Funds | 26.2 |
| Investment Grade | 26.2 |
| Allocations to Tactical Assets | |
| Money Market Fund Shares Held to Cover Open Derivatives Instruments(a) | 4.2 |
| Options Purchased Puts | 1.4 |
| Residential Mortgage-Backed Securities - Agency | 9.6 |
| Total | 100.0 |
| (a) | Includes investments in Money Market Funds (amounting to $8.6 million) which have been segregated to cover obligations relating to the Fund’s investment in derivatives as part of its tactical allocation strategy. For a description of the Fund’s investments in derivatives, see Investments in derivatives following the Portfolio of Investments and Note 2 to the Notes to Financial Statements. |
Percentages indicated are based upon
total investments including options purchased and excluding all other investments in derivatives, if any. The Fund’s portfolio composition is subject to change.
| 4 | Variable Portfolio – Managed Risk Fund | Semiannual Report 2020 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount 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 results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
In addition to the ongoing expenses
which the Fund bears directly, the Fund’s shareholders indirectly bear the Fund’s allocable share of the costs and expenses of each underlying fund in which the Fund invests. You can also estimate the
effective expenses paid during the period, which includes the indirect fees associated with investing in the underlying funds, by using the amounts listed in the "Effective expenses paid during the period" column.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
| January 1, 2020 — June 30, 2020 | ||||||||||
| Account value at the beginning of the period ($) | Account value at the end of the period ($) | Expenses paid during the period ($) | Fund’s annualized expense ratio (%) | Effective expenses paid during the period ($) | Fund’s effective annualized expense ratio (%) | |||||
| Actual | Hypothetical | Actual | Hypothetical | Actual | Hypothetical | Actual | Actual | Hypothetical | Actual | |
| Class 1 | 1,000.00 | 1,000.00 | 972.90 | 1,023.62 | 1.23 | 1.26 | 0.25 | 3.88 | 3.97 | 0.79 |
| Class 2 | 1,000.00 | 1,000.00 | 972.00 | 1,022.38 | 2.45 | 2.51 | 0.50 | 5.10 | 5.23 | 1.04 |
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 366.
Effective expenses paid during the
period and the Fund’s effective annualized expense ratio include expenses borne directly to the class plus the Fund’s pro rata portion of the ongoing expenses charged by the underlying funds using the
expense ratio of each class of the underlying funds as of the underlying fund’s most recent shareholder report.
| Variable Portfolio – Managed Risk Fund | Semiannual Report 2020 | 5 |
Portfolio of Investments
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
(Percentages represent value of
investments compared to net assets)
Investments in securities
At June 30, 2020,
securities and/or cash totaling $4,695,295 were pledged as collateral.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 6 | Variable Portfolio – Managed Risk Fund | Semiannual Report 2020 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Investments in derivatives
| Long futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| S&P 500 Index E-mini | 78 | 09/2020 | USD | 12,051,780 | 342,142 | — |
| U.S. Long Bond | 20 | 09/2020 | USD | 3,571,250 | 15,032 | — |
| U.S. Treasury 10-Year Note | 45 | 09/2020 | USD | 6,262,734 | 15,815 | — |
| U.S. Treasury 2-Year Note | 17 | 09/2020 | USD | 3,754,078 | 1,512 | — |
| U.S. Treasury 5-Year Note | 81 | 09/2020 | USD | 10,185,117 | 20,865 | — |
| U.S. Ultra Treasury Bond | 22 | 09/2020 | USD | 4,799,438 | — | (18,091) |
| Total | 395,366 | (18,091) | ||||
| Short futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| Australian Dollar | (18) | 09/2020 | USD | (1,242,000) | 21,893 | — |
| British Pound | (13) | 09/2020 | USD | (1,007,256) | 17,896 | — |
| Canadian Dollar | (3) | 09/2020 | USD | (220,860) | 3,625 | — |
| Euro FX | (7) | 09/2020 | USD | (984,681) | 9,861 | — |
| Euro FX | (7) | 09/2020 | USD | (984,681) | — | (1,832) |
| EURO STOXX 50 Index | (47) | 09/2020 | EUR | (1,514,810) | — | (57,686) |
| FTSE 100 Index | (14) | 09/2020 | GBP | (860,650) | — | (12,985) |
| Hang Seng Index | (2) | 07/2020 | HKD | (2,424,700) | 1,034 | — |
| Japanese Yen | (24) | 09/2020 | USD | (2,781,300) | 2,098 | — |
| MSCI EAFE Index | (3) | 09/2020 | USD | (266,760) | — | (1,792) |
| MSCI Singapore Index | (4) | 07/2020 | SGD | (118,340) | 1,027 | — |
| New Zealand Dollar | (4) | 09/2020 | USD | (258,200) | 4,205 | — |
| OMXS30 Index | (242) | 07/2020 | SEK | (40,323,250) | — | (184,270) |
| Russell 2000 Index E-mini | (90) | 09/2020 | USD | (6,469,200) | — | (369,993) |
| S&P 500 Index E-mini | (91) | 09/2020 | USD | (14,060,410) | — | (309,503) |
| SPI 200 Index | (8) | 09/2020 | AUD | (1,178,400) | — | (21,108) |
| Swiss Franc | (12) | 09/2020 | USD | (1,587,000) | — | (12,851) |
| TOPIX Index | (14) | 09/2020 | JPY | (218,190,000) | 52,457 | — |
| TOPIX Index | (6) | 09/2020 | JPY | (93,510,000) | — | (12,969) |
| Total | 114,096 | (984,989) | ||||
| Put option contracts purchased | ||||||||
| Description | Counterparty | Trading currency | Notional amount | Number of contracts | Exercise price/Rate | Expiration date | Cost ($) | Value ($) |
| S&P 500 Index | JPMorgan | USD | 35,033,277 | 113 | 2,500.00 | 12/17/2021 | 1,906,125 | 2,073,550 |
| S&P 500 Index | JPMorgan | USD | 8,680,812 | 28 | 2,600.00 | 12/17/2021 | 482,258 | 631,960 |
| S&P 500 Index | JPMorgan | USD | 4,650,435 | 15 | 2,400.00 | 12/17/2021 | 272,026 | 239,100 |
| Total | 2,660,409 | 2,944,610 | ||||||
| Cleared credit default swap contracts - sell protection | ||||||||||||
| Reference entity | Counterparty | Maturity date | Receive fixed rate (%) | Payment frequency | Implied credit spread (%)* | Notional currency | Notional amount | Value ($) | Upfront payments ($) | Upfront receipts ($) | Unrealized appreciation ($) | Unrealized depreciation ($) |
| Markit CDX North America Investment Grade Index, Series 34 | Morgan Stanley | 06/20/2025 | 1.000 | Quarterly | 0.762 | USD | 6,000,000 | 49,414 | — | — | 49,414 | — |
| * | Implied credit spreads, represented in absolute terms, utilized in determining the market value of credit default swap agreements on corporate or sovereign issues as of period end serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement. |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – Managed Risk Fund | Semiannual Report 2020 | 7 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Notes to Portfolio of
Investments
| (a) | As defined in the Investment Company Act of 1940, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the period ended June 30, 2020 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Capital gain distributions($) | Realized gain (loss)($) | Dividends — affiliated issuers ($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.253% | |||||||||
| 14,130,213 | 46,694,175 | (52,189,343) | 126 | 8,635,171 | — | 1,814 | 55,631 | 8,635,171 | |
| Columbia Variable Portfolio – Disciplined Core Fund, Class 1 Shares | |||||||||
| 31,621,723 | 3,900,812 | (3,261,506) | (482,942) | 31,778,087 | — | (116,599) | — | 558,490 | |
| Columbia Variable Portfolio – Intermediate Bond Fund, Class 1 Shares | |||||||||
| 23,806,494 | 1,050,384 | (2,770,277) | 1,450,909 | 23,537,510 | — | 31,234 | — | 2,071,964 | |
| CTIVP® – Lazard International Equity Advantage Fund, Class 1 Shares | |||||||||
| 31,720,147 | 5,998,936 | (2,710,254) | (3,245,997) | 31,762,832 | — | (655,176) | 51,874 | 3,281,284 | |
| CTIVP® – Wells Fargo Short Duration Government Fund, Class 1 Shares | |||||||||
| 7,938,027 | 621,750 | (1,119,628) | 225,206 | 7,665,355 | — | 24,617 | — | 723,146 | |
| Variable Portfolio - Partners Core Bond Fund, Class 1 Shares | |||||||||
| 23,791,467 | 1,464,139 | (3,371,033) | 1,289,210 | 23,173,783 | — | 115,668 | — | 1,960,557 | |
| Variable Portfolio - Partners Core Equity Fund, Class 1 Shares | |||||||||
| 31,666,116 | 3,849,618 | (2,802,872) | (1,066,084) | 31,646,778 | — | (114,664) | — | 1,389,846 | |
| Variable Portfolio – Partners Small Cap Growth Fund, Class 1 Shares | |||||||||
| 3,948,634 | 555,573 | (512,652) | 96,209 | 4,087,764 | — | (43,881) | — | 162,342 | |
| Variable Portfolio – Partners Small Cap Value Fund, Class 1 Shares | |||||||||
| 3,961,730 | 1,259,250 | (454,849) | (761,475) | 4,004,656 | — | (127,231) | — | 178,699 | |
| Total | 172,584,551 | (2,494,838) | 166,291,936 | — | (884,218) | 107,505 | |||
| (b) | Non-income producing investment. |
| (c) | Represents a security purchased on a when-issued basis. |
| (d) | The rate shown is the seven-day current annualized yield at June 30, 2020. |
Abbreviation Legend
| TBA | To Be Announced |
Currency Legend
| AUD | Australian Dollar |
| EUR | Euro |
| GBP | British Pound |
| HKD | Hong Kong Dollar |
| JPY | Japanese Yen |
| SEK | Swedish Krona |
| SGD | Singapore Dollar |
| USD | US Dollar |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 8 | Variable Portfolio – Managed Risk Fund | Semiannual Report 2020 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Fair value measurements (continued)
pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Certain investments that have been
measured at fair value using the net asset value (NAV) per share (or its equivalent) are not categorized in the fair value hierarchy. The fair value amounts presented in the table are intended to reconcile the fair
value hierarchy to the amounts presented in the Portfolio of Investments. The Variable Portfolios serve as investment vehicles for variable annuity contracts and variable life insurance policies. Principle investment
strategies within these Variable Portfolios vary based on the Portfolios investment objective. Investments in the Variable Portfolios may be redeemed on a daily basis without restriction.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at June 30, 2020:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Assets at NAV ($) | Total ($) | |
| Investments in Securities | |||||
| Equity Funds | — | — | — | 103,280,117 | 103,280,117 |
| Exchange-Traded Fixed Income Funds | 17,980,827 | — | — | — | 17,980,827 |
| Fixed Income Funds | — | — | — | 54,376,648 | 54,376,648 |
| Residential Mortgage-Backed Securities - Agency | — | 19,876,182 | — | — | 19,876,182 |
| Options Purchased Puts | 2,944,610 | — | — | — | 2,944,610 |
| Money Market Funds | 8,635,171 | — | — | — | 8,635,171 |
| Total Investments in Securities | 29,560,608 | 19,876,182 | — | 157,656,765 | 207,093,555 |
| Investments in Derivatives | |||||
| Asset | |||||
| Futures Contracts | 509,462 | — | — | — | 509,462 |
| Swap Contracts | — | 49,414 | — | — | 49,414 |
| Liability | |||||
| Futures Contracts | (1,003,080) | — | — | — | (1,003,080) |
| Total | 29,066,990 | 19,925,596 | — | 157,656,765 | 206,649,351 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The Fund’s assets assigned to
the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical
assets.
Futures contracts and swap contracts
are valued at unrealized appreciation (depreciation).
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – Managed Risk Fund | Semiannual Report 2020 | 9 |
Statement of Assets and Liabilities
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $36,425,551) | $37,857,009 |
| Affiliated issuers (cost $157,581,293) | 166,291,936 |
| Options purchased (cost $2,660,409) | 2,944,610 |
| Margin deposits on: | |
| Futures contracts | 4,469,329 |
| Swap contracts | 225,966 |
| Receivable for: | |
| Investments sold | 122,356 |
| Dividends | 1,924 |
| Interest | 22,208 |
| Variation margin for futures contracts | 203,332 |
| Variation margin for swap contracts | 8,346 |
| Trustees’ deferred compensation plan | 14,489 |
| Total assets | 212,161,505 |
| Liabilities | |
| Payable for: | |
| Investments purchased on a delayed delivery basis | 19,922,044 |
| Capital shares purchased | 143,949 |
| Variation margin for futures contracts | 352,735 |
| Management services fees | 759 |
| Distribution and/or service fees | 1,303 |
| Service fees | 9,444 |
| Compensation of board members | 2,492 |
| Compensation of chief compliance officer | 15 |
| Other expenses | 18,554 |
| Trustees’ deferred compensation plan | 14,489 |
| Total liabilities | 20,465,784 |
| Net assets applicable to outstanding capital stock | $191,695,721 |
| Represented by | |
| Trust capital | $191,695,721 |
| Total - representing net assets applicable to outstanding capital stock | $191,695,721 |
| Class 1 | |
| Net assets | $2,656 |
| Shares outstanding | 239 |
| Net asset value per share(a) | $11.13 |
| Class 2 | |
| Net assets | $191,693,065 |
| Shares outstanding | 17,270,007 |
| Net asset value per share | $11.10 |
| (a) | Net asset value per share rounds to this amount due to fractional shares outstanding. |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 10 | Variable Portfolio – Managed Risk Fund | Semiannual Report 2020 |
Statement of Operations
Six Months Ended June 30, 2020 (Unaudited)
Six Months Ended June 30, 2020 (Unaudited)
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $179,846 |
| Dividends — affiliated issuers | 107,505 |
| Interest | 2,647 |
| Total income | 289,998 |
| Expenses: | |
| Management services fees | 125,016 |
| Distribution and/or service fees | |
| Class 2 | 231,552 |
| Service fees | 55,639 |
| Compensation of board members | 7,906 |
| Custodian fees | 11,445 |
| Printing and postage fees | 6,008 |
| Audit fees | 14,669 |
| Legal fees | 2,275 |
| Compensation of chief compliance officer | 33 |
| Other | 4,455 |
| Total expenses | 458,998 |
| Net investment loss | (169,000) |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 88,822 |
| Investments — affiliated issuers | (884,218) |
| Foreign currency translations | (55,273) |
| Futures contracts | (6,694,894) |
| Options purchased | 4,151,850 |
| Swap contracts | 9,786 |
| Net realized loss | (3,383,927) |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | 806,082 |
| Investments — affiliated issuers | (2,494,838) |
| Foreign currency translations | 2,994 |
| Futures contracts | (708,886) |
| Options purchased | 683,987 |
| Swap contracts | 49,414 |
| Net change in unrealized appreciation (depreciation) | (1,661,247) |
| Net realized and unrealized loss | (5,045,174) |
| Net decrease in net assets resulting from operations | $(5,214,174) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Variable Portfolio – Managed Risk Fund | Semiannual Report 2020 | 11 |
Statement of Changes in Net Assets
| Six Months Ended June 30, 2020 (Unaudited) | Year Ended December 31, 2019 | |
| Operations | ||
| Net investment income (loss) | $(169,000) | $1,639,256 |
| Net realized gain (loss) | (3,383,927) | 1,780,412 |
| Net change in unrealized appreciation (depreciation) | (1,661,247) | 16,801,237 |
| Net increase (decrease) in net assets resulting from operations | (5,214,174) | 20,220,905 |
| Increase in net assets from capital stock activity | 10,156,978 | 69,161,743 |
| Total increase in net assets | 4,942,804 | 89,382,648 |
| Net assets at beginning of period | 186,752,917 | 97,370,269 |
| Net assets at end of period | $191,695,721 | $186,752,917 |
| Six Months Ended | Year Ended | |||
| June 30, 2020 (Unaudited) | December 31, 2019 (a) | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | — | — | 239 | 2,500 |
| Net increase | — | — | 239 | 2,500 |
| Class 2 | ||||
| Subscriptions | 1,338,564 | 14,680,341 | 6,558,958 | 70,246,048 |
| Redemptions | (421,839) | (4,523,363) | (99,019) | (1,086,805) |
| Net increase | 916,725 | 10,156,978 | 6,459,939 | 69,159,243 |
| Total net increase | 916,725 | 10,156,978 | 6,460,178 | 69,161,743 |
| (a) | Class 1 shares are based on operations from February 20, 2019 (commencement of operations) through the stated period end. |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 12 | Variable Portfolio – Managed Risk Fund | Semiannual Report 2020 |
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| Variable Portfolio – Managed Risk Fund | Semiannual Report 2020 | 13 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income (loss) | Net realized and unrealized gain (loss) | Total from investment operations | |
| Class 1 | ||||
| Six Months Ended 6/30/2020 (Unaudited) | $11.44 | 0.01 | (0.32) | (0.31) |
| Year Ended 12/31/2019(d) | $10.48 | 0.15 | 0.81 | 0.96 |
| Class 2 | ||||
| Six Months Ended 6/30/2020 (Unaudited) | $11.42 | (0.01) | (0.31) | (0.32) |
| Year Ended 12/31/2019 | $9.84 | 0.12 | 1.46 | 1.58 |
| Year Ended 12/31/2018 | $10.39 | 0.09 | (0.64) | (0.55) |
| Year Ended 12/31/2017(e) | $10.00 | (0.00)(f) | 0.39 | 0.39 |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Annualized. |
| (d) | Class 1 shares commenced operations on February 20, 2019. Per share data and total return reflect activity from that date. |
| (e) | The Fund commenced operations on September 12, 2017. Per share data and total return reflect activity from that date. |
| (f) | Rounds to zero. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 14 | Variable Portfolio – Managed Risk Fund | Semiannual Report 2020 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income (loss) ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Six Months Ended 6/30/2020 (Unaudited) | $11.13 | (2.71%) | 0.25%(c) | 0.25%(c) | 0.06%(c) | 40% | $3 |
| Year Ended 12/31/2019(d) | $11.44 | 9.16% | 0.25%(c) | 0.25%(c) | 1.57%(c) | 37% | $3 |
| Class 2 | |||||||
| Six Months Ended 6/30/2020 (Unaudited) | $11.10 | (2.80%) | 0.50%(c) | 0.50%(c) | (0.18%)(c) | 40% | $191,693 |
| Year Ended 12/31/2019 | $11.42 | 16.06% | 0.51% | 0.51% | 1.12% | 37% | $186,750 |
| Year Ended 12/31/2018 | $9.84 | (5.29%) | 0.61% | 0.55% | 0.85% | 47% | $97,370 |
| Year Ended 12/31/2017(e) | $10.39 | 3.90% | 1.17%(c) | 0.49%(c) | (0.01%)(c) | 75% | $17,803 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – Managed Risk Fund | Semiannual Report 2020 | 15 |
Notes to Financial Statements
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Note 1. Organization
Variable Portfolio –
Managed Risk Fund (the Fund), a series of Columbia Funds Variable Insurance Trust (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an
open-end management investment company organized as a Massachusetts business trust.
The Fund is a
“fund-of-funds”, investing significantly in affiliated funds managed by the Investment Manager, a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial), its affiliates, or
third-party advised (unaffiliated) funds, including exchange-traded funds (collectively, Underlying Funds). The Fund is exposed to the same risks as the Underlying Funds in direct proportion to the allocation of its
assets among the Underlying Funds. For information on the investment strategies and risks of the Underlying Funds, please refer to the Fund’s current prospectus and the prospectuses of the Underlying Funds,
which are available, free of charge, from the Securities and Exchange Commission website at www.sec.gov.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1 and Class 2 shares to separate accounts funding variable annuity contracts (Contracts) issued by affiliated life insurance companies (Participating
Insurance Companies) and other qualified institutional investors (Qualified Investors) authorized by Columbia Management Investment Distributors, Inc. (the Distributor). You may not buy (nor will you own) shares of
the Fund directly. You may invest by buying a Contract.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on any
exchange are valued at the mean between the closing bid and asked prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Asset- and mortgage-backed
securities are generally valued by pricing services, which utilize pricing models that incorporate the securities’ cash flow and loan performance data. These models also take into account available market data,
including trades, market quotations, and benchmark yield curves for identical or similar securities. Factors used to identify similar securities may include, but are not limited to, issuer, collateral type, vintage,
prepayment speeds, collateral performance, credit ratings, credit enhancement and expected life. Asset-backed securities for which quotations are readily available may also be valued based upon an over-the-counter or
exchange bid quote from an approved independent broker-dealer.
Investments in the Underlying Funds
(other than ETFs) are valued at the latest net asset value reported by those companies as of the valuation time.
Futures and options on futures
contracts are valued based upon the settlement price at the close of regular trading on their principal exchanges or, in the absence of transactions, at the mean of the latest quoted bid and ask prices.
| 16 | Variable Portfolio – Managed Risk Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Option contracts are valued at the
mean of the latest quoted bid and ask prices on their primary exchanges. Option contracts, including over-the-counter option contracts, with no readily available market quotations are valued using mid-market
evaluations from independent third-party vendors.
Swap transactions are valued
through an independent pricing service or broker, or if neither is available, through an internal model based upon observable inputs.
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Foreign currency transactions and
translations
The values of all assets and
liabilities denominated in foreign currencies are generally translated into U.S. dollars at exchange rates determined at the close of regular trading on the New York Stock Exchange. Net realized and unrealized gains
(losses) on foreign currency transactions and translations include gains (losses) arising from the fluctuation in exchange rates between trade and settlement dates on securities transactions, gains (losses) arising
from the disposition of foreign currency and currency gains (losses) between the accrual and payment dates on dividends, interest income and foreign withholding taxes.
For financial statement purposes,
the Fund does not distinguish that portion of gains (losses) on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations
are included with the net realized and unrealized gains (losses) on investments in the Statement of Operations.
Derivative instruments
The Fund invests in certain
derivative instruments, as detailed below, to meet its investment objectives. Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more securities,
currencies, commodities, indices, or other assets or instruments. Derivatives may be used to increase investment flexibility (including to maintain cash reserves while maintaining desired exposure to certain assets),
for risk management (hedging) purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain investment risks,
such as foreign currency exchange rate risk, interest rate risk and credit risk. Derivatives may involve various risks, including the potential inability of the counterparty to fulfill its obligations under the terms
of the contract, the potential for an illiquid secondary market (making it difficult for the Fund to sell or terminate, including at favorable prices) and the potential for market movements which may expose the Fund
to gains or losses in excess of the amount shown in the Statement of Assets and Liabilities. The notional amounts of derivative instruments, if applicable, are not recorded in the financial statements.
A derivative instrument may suffer
a marked-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform its
obligations under the contract. The Fund’s risk of loss from counterparty credit risk on over-the-counter derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by
the Fund and the amount of any variation margin held by the counterparty, plus any replacement costs or related amounts. With exchange-traded or centrally cleared derivatives, there is reduced counterparty credit risk
to the Fund since the clearinghouse or central counterparty (CCP) provides some protection in the case of clearing member default. The clearinghouse or CCP stands between the buyer and the seller of the contract;
therefore, additional counterparty credit risk is failure of the clearinghouse or CCP. However, credit risk still exists in exchange-traded or centrally cleared derivatives with respect to initial and variation margin
that is held
| Variable Portfolio – Managed Risk Fund | Semiannual Report 2020 | 17 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
in a broker’s customer account. While
brokers are required to segregate customer margin from their own assets, in the event that a broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin
held by the broker for all its clients, U.S. bankruptcy laws will typically allocate that shortfall on a pro-rata basis across all the broker’s customers (including the Fund), potentially resulting in losses to
the Fund.
In order to better define its
contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement)
or similar agreement with its derivatives contract counterparties. An ISDA Master Agreement is an agreement between the Fund and a counterparty that governs over-the-counter derivatives and typically contains, among
other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset with the counterparty
certain derivative instrument’s payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment
in the event of default (close-out netting), including the bankruptcy or insolvency of the counterparty. Note, however, that bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or
prohibitions against the right of offset or netting in bankruptcy, insolvency or other events.
Collateral (margin) requirements
differ by type of derivative. Margin requirements are established by the clearinghouse or CCP for exchange-traded and centrally cleared derivatives. Brokers can ask for margin in excess of the minimum in certain
circumstances. Collateral terms are contract specific for over-the-counter derivatives. For over-the-counter derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by
netting the marked-to-market amount for each transaction under such agreement and comparing that amount to the value of any variation margin currently pledged by the Fund and/or the counterparty. Generally, the amount
of collateral due from or to a party has to exceed a minimum transfer amount threshold (e.g., $250,000) before a transfer has to be made. To the extent amounts due to the Fund from its counterparties are not fully
collateralized, contractually or otherwise, the Fund bears the risk of loss from counterparty nonperformance. The Fund may also pay interest expense on cash collateral received from the broker. Any interest expense
paid by the Fund is shown on the Statement of Operations. The Fund attempts to mitigate counterparty risk by only entering into agreements with counterparties that it believes have the financial resources to honor
their obligations and by monitoring the financial stability of those counterparties.
Certain ISDA Master Agreements
allow counterparties of over-the-counter derivatives transactions to terminate derivatives contracts prior to maturity in the event the Fund’s net asset value declines by a stated percentage over a specified
time period or if the Fund fails to meet certain terms of the ISDA Master Agreement, which would cause the Fund to accelerate payment of any net liability owed to the counterparty. The Fund also has termination rights
if the counterparty fails to meet certain terms of the ISDA Master Agreement. In determining whether to exercise such termination rights, the Fund would consider, in addition to counterparty credit risk, whether
termination would result in a net liability owed from the counterparty.
For financial reporting purposes,
the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statement of Assets and Liabilities.
Futures contracts
Futures contracts are
exchange-traded and represent commitments for the future purchase or sale of an asset at a specified price on a specified date. The Fund bought and sold futures contracts to produce incremental earnings, to manage the
duration and yield curve exposure of the Fund versus the benchmark, to manage exposure to movements in interest rates, to manage exposure to the securities market and to maintain appropriate equity market exposure
while keeping sufficient cash to accommodate daily redemptions. These instruments may be used for other purposes in future periods. Upon entering into futures contracts, the Fund bears risks that it may not achieve
the anticipated benefits of the futures contracts and may realize a loss. Additional risks include counterparty credit risk, the possibility of an illiquid market, and that a change in the value of the contract or
option may not correlate with changes in the value of the underlying asset.
Upon entering into a futures
contract, the Fund deposits cash or securities with the broker, known as a futures commission merchant (FCM), in an amount sufficient to meet the initial margin requirement. The initial margin deposit must be
maintained at an established level over the life of the contract. Cash deposited as initial margin is recorded in the Statement of Assets and Liabilities as margin deposits. Securities deposited as initial margin are
designated in the Portfolio of Investments. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are
| 18 | Variable Portfolio – Managed Risk Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
equal to the daily change in the contract value
and are recorded as variation margin receivable or payable and are offset in unrealized gains or losses. The Fund recognizes a realized gain or loss when the contract is closed or expires. Futures contracts involve,
to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities.
Options contracts
Options are contracts which entitle
the holder to purchase or sell securities or other identified assets at a specified price, or in the case of index option contracts, to receive or pay the difference between the index value and the strike price of the
index option contract. Option contracts can be either exchange-traded or over-the-counter. The Fund purchased option contracts to produce incremental earnings, to decrease the Fund’s exposure to equity market
risk, to increase return on investments and to facilitate buying and selling of securities for investments. These instruments may be used for other purposes in future periods. Completion of transactions for option
contracts traded in the over-the-counter market depends upon the performance of the other party. Cash collateral may be collected or posted by the Fund to secure certain over-the-counter option contract trades. Cash
collateral held or posted by the Fund for such option contract trades must be returned to the broker or the Fund upon closure, exercise or expiration of the contract.
Options contracts purchased are
recorded as investments. When the Fund writes an options contract, the premium received is recorded as an asset and an amount equivalent to the premium is recorded as a liability in the Statement of Assets and
Liabilities and is subsequently adjusted to reflect the current fair value of the option written. Changes in the fair value of the written option are recorded as unrealized appreciation or depreciation until the
contract is exercised or has expired. The Fund will realize a gain or loss when the option contract is closed or expires. When option contracts are exercised, the proceeds on sales for a written call or purchased put
option contract, or the purchase cost for a written put or purchased call option contract, is adjusted by the amount of premium received or paid.
For over-the-counter options
purchased, the Fund bears the risk of loss of the amount of the premiums paid plus the positive change in market values net of any collateral held by the Fund should the counterparty fail to perform under the
contracts. Option contracts written by the Fund do not typically give rise to significant counterparty credit risk, as options written generally obligate the Fund and not the counterparty to perform. The risk in
writing a call option contract is that the Fund gives up the opportunity for profit if the market price of the security increases above the strike price and the option contract is exercised. The risk in writing a put
option contract is that the Fund may incur a loss if the market price of the security decreases below the strike price and the option contract is exercised. Exercise of a written option could result in the Fund
purchasing or selling a security or foreign currency when it otherwise would not, or at a price different from the current market value. In purchasing and writing options, the Fund bears the risk of an unfavorable
change in the value of the underlying instrument or the risk that the Fund may not be able to enter into a closing transaction due to an illiquid market.
Swap contracts
Swap contracts are negotiated in
the over-the-counter market and may be entered into as a bilateral contract or centrally cleared (centrally cleared swap contract). In a centrally cleared swap contract, immediately following execution of the swap
contract with a broker, the swap contract is novated to a central counterparty (the CCP) and the CCP becomes the Fund’s counterparty to the centrally cleared swap contract. The Fund is required to deposit
initial margin with the futures commission merchant (FCM), which pledges it through to the CCP in the form of cash or securities in an amount that varies depending on the size and risk profile of the particular swap
contract. Securities deposited as initial margin are designated in the Portfolio of Investments and cash deposited is recorded in the Statement of Assets and Liabilities as margin deposits. Unlike a bilateral swap
contract, for centrally cleared swap contracts, the Fund has minimal credit exposure to the FCM because the CCP stands between the Fund and the relevant buyer/seller on the other side of the contract. Swap contracts
are marked-to-market daily and changes in value are recorded as unrealized appreciation (depreciation). The daily change in valuation of centrally cleared swap contracts, if any, is recorded as a receivable or payable
for variation margin in the Statement of Assets and Liabilities.
| Variable Portfolio – Managed Risk Fund | Semiannual Report 2020 | 19 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Entering into these contracts
involves, to varying degrees, elements of interest, liquidity and counterparty credit risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that there
may be unfavorable changes in interest rates, market conditions or other conditions, that it may be difficult to initiate a swap transaction or liquidate a position at an advantageous time or price which may result in
significant losses, and that the FCM or CCP may not fulfill its obligation under the contract.
Credit default swap contracts
The Fund entered into credit
default swap contracts to increase or decrease its credit exposure to an index and to manage credit risk exposure. These instruments may be used for other purposes in future periods. Credit default swap contracts are
agreements in which one party pays fixed periodic payments to a counterparty in consideration for an agreement from the counterparty to make a specific payment should a specified credit event(s) take place. Although
specified credit events are contract specific, credit events are generally defined as bankruptcy, failure to pay, restructuring, obligation acceleration, obligation default, or repudiation/moratorium.
As the purchaser of a credit
default swap contract, the Fund purchases protection by paying a periodic interest rate on the notional amount to the counterparty. The interest amount is accrued daily as a component of unrealized appreciation
(depreciation) and is recorded as a realized loss upon payment. If a credit event as specified in the contract occurs, the Fund may have the option either to deliver the reference obligation to the seller in exchange
for a cash payment of its par amount, or to receive a net cash settlement equal to the par amount less an agreed-upon value of the reference obligation as of the date of the credit event. The difference between the
value of the obligation or cash delivered and the notional amount received will be recorded as a realized gain (loss).
As the seller of a credit default
swap contract, the Fund sells protection to a buyer and will generally receive a periodic interest rate on a notional amount. The interest amount is accrued daily as a component of unrealized appreciation
(depreciation) and is recorded as a realized gain upon receipt of the payment. If a credit event as specified in the contract with the counterparty occurs, the Fund may either be required to accept the reference
obligation from the buyer in exchange for a cash payment of its notional amount, or to pay the buyer a net cash settlement equal to the notional amount less an agreed-upon value of the reference obligation (recovery
value) as of the date of the credit event. The difference between the value of the obligation or cash received and the notional amount paid will be recorded as a realized gain (loss). The maximum potential amount of
undiscounted future payments the Fund could be required to make as the seller of protection under a credit default swap contract is equal to the notional amount of the reference obligation. These potential amounts may
be partially offset by any recovery values of the respective reference obligations or upfront receipts upon entering into the agreement. The notional amounts and market values of all credit default swap contracts in
which the Fund is the seller of protection, if any, are disclosed in the Credit Default Swap Contracts Outstanding schedule following the Portfolio of Investments.
As a protection seller, the Fund
bears the risk of loss from the credit events specified in the contract with the counterparty. For credit default swap contracts on credit indices, quoted market prices and resulting market values serve as an
indicator of the current status of the payment/performance risk. Increasing market values, in absolute terms when compared to the notional amount of the swap, represent a deterioration of the reference entity’s
credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the contract.
Any upfront payments or receipts by
the Fund upon entering into a credit default swap contract is recorded as an asset or liability, respectively, and amortized daily as a component of realized gain (loss) in the Statement of Operations. Credit default
swap contracts are valued daily, and the change in value is recorded as unrealized appreciation (depreciation) until the termination of the swap, at which time a realized gain (loss) is recorded.
Credit default swap contracts can
involve greater risks than if a fund had invested in the reference obligation directly since, in addition to general market risks, credit default swaps are subject to counterparty credit risk, leverage risk, hedging
risk, correlation risk and liquidity risk.
| 20 | Variable Portfolio – Managed Risk Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Effects of derivative transactions in
the financial statements
The following tables are intended
to provide additional information about the effect of derivatives on the financial statements of the Fund, including: the fair value of derivatives by risk category and the location of those fair values in the
Statement of Assets and Liabilities; and the impact of derivative transactions over the period in the Statement of Operations, including realized and unrealized gains (losses). The derivative instrument schedules
following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any.
The following table is a summary of
the fair value of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) at June 30, 2020:
| Asset derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Credit risk | Component of trust capital — unrealized appreciation on swap contracts | 49,414* |
| Equity risk | Component of trust capital — unrealized appreciation on futures contracts | 396,660* |
| Equity risk | Investments, at value — Options Purchased | 2,944,610 |
| Foreign exchange risk | Component of trust capital — unrealized appreciation on futures contracts | 59,578* |
| Interest rate risk | Component of trust capital — unrealized appreciation on futures contracts | 53,224* |
| Total | 3,503,486 |
| Liability derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Equity risk | Component of trust capital - unrealized depreciation on futures contracts | 970,306* |
| Foreign exchange risk | Component of trust capital - unrealized depreciation on futures contracts | 14,683* |
| Interest rate risk | Component of trust capital - unrealized depreciation on futures contracts | 18,091* |
| Total | 1,003,080 |
| * | Includes cumulative appreciation (depreciation) as reported in the tables following the Portfolio of Investments. Only the current day’s variation margin is reported in receivables or payables in the Statement of Assets and Liabilities. |
| Variable Portfolio – Managed Risk Fund | Semiannual Report 2020 | 21 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
The following table indicates the
effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) in the Statement of Operations for the six months ended June 30, 2020:
| Amount of realized gain (loss) on derivatives recognized in income | ||||||
| Risk exposure category | Futures contracts ($) | Options contracts purchased ($) | Swap contracts ($) | Total ($) | ||
| Credit risk | — | — | 9,786 | 9,786 | ||
| Equity risk | (7,426,050) | 4,151,850 | — | (3,274,200) | ||
| Foreign exchange risk | (193,119) | — | — | (193,119) | ||
| Interest rate risk | 924,275 | — | — | 924,275 | ||
| Total | (6,694,894) | 4,151,850 | 9,786 | (2,533,258) | ||
| Change in unrealized appreciation (depreciation) on derivatives recognized in income | ||||||
| Risk exposure category | Futures contracts ($) | Options contracts purchased ($) | Swap contracts ($) | Total ($) | ||
| Credit risk | — | — | 49,414 | 49,414 | ||
| Equity risk | (958,189) | 683,987 | — | (274,202) | ||
| Foreign exchange risk | 65,171 | — | — | 65,171 | ||
| Interest rate risk | 184,132 | — | — | 184,132 | ||
| Total | (708,886) | 683,987 | 49,414 | 24,515 | ||
The following table is a summary
of the average outstanding volume by derivative instrument for the six months ended June 30, 2020:
| Derivative instrument | Average notional amounts ($)* |
| Futures contracts — long | 44,293,477 |
| Futures contracts — short | 35,105,917 |
| Credit default swap contracts — sell protection | 3,000,000 |
| Derivative instrument | Average value ($)* |
| Options contracts — purchased | 2,586,768 |
| * | Based on the ending quarterly outstanding amounts for the six months ended June 30, 2020. |
Asset- and mortgage-backed
securities
The Fund may invest in asset-backed
and mortgage-backed securities. The maturity dates shown represent the original maturity of the underlying obligation. Actual maturity may vary based upon prepayment activity on these obligations. All, or a portion,
of the obligation may be prepaid at any time because the underlying asset may be prepaid. As a result, decreasing market interest rates could result in an increased level of prepayment. An increased prepayment rate
will have the effect of shortening the maturity of the security. Unless otherwise noted, the coupon rates presented are fixed rates.
Delayed delivery securities
The Fund may trade securities on
other than normal settlement terms, including securities purchased or sold on a “when-issued” or "forward commitment" basis. This may increase risk to the Fund since the other party to the transaction may
fail to deliver, which could cause the Fund to subsequently invest at less advantageous prices. The Fund designates cash or liquid securities in an amount equal to the delayed delivery commitment.
| 22 | Variable Portfolio – Managed Risk Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
To be announced securities
The Fund may trade securities on a
To Be Announced (TBA) basis. As with other delayed-delivery transactions, a seller agrees to issue a TBA security at a future date. However, the seller does not specify the particular securities to be delivered.
Instead, the Fund agrees to accept any security that meets specified terms.
In some cases, Master Securities
Forward Transaction Agreements (MSFTAs) may be used to govern transactions of certain forward-settling agency mortgage-backed securities, such as delayed-delivery and TBAs, between the Fund and counterparty. The MSFTA
maintains provisions for, among other things, initiation and confirmation, payment and transfer, events of default, termination, and maintenance of collateral relating to such transactions.
Mortgage dollar roll transactions
The Fund may enter into mortgage
“dollar rolls” in which the Fund sells securities for delivery in the current month and simultaneously contracts with the same counterparty to repurchase similar but not identical securities (same type,
coupon and maturity) on a specified future date. During the roll period, the Fund loses the right to receive principal and interest paid on the securities sold. However, the Fund will benefit because it receives
negotiated amounts in the form of reductions of the purchase price for the future purchase plus the interest earned on the cash proceeds of the securities sold until the settlement date of the forward purchase. The
Fund records the incremental difference between the forward purchase and sale of each forward roll as a realized gain or loss. Unless any realized gains exceed the income, capital appreciation, and gain or loss due to
mortgage prepayments that would have been realized on the securities sold as part of the mortgage dollar roll, the use of this technique will diminish the investment performance of the Fund compared to what the
performance would have been without the use of mortgage dollar rolls. All cash proceeds will be invested in instruments that are permissible investments for the Fund. The Fund identifies cash or liquid securities in
an amount equal to the forward purchase price.
For financial reporting and tax
purposes, the Fund treats “to be announced” mortgage dollar rolls as two separate transactions, one involving the purchase of a security and a separate transaction involving a sale. These transactions may
increase the Fund’s portfolio turnover rate. The Fund does not currently enter into mortgage dollar rolls that are accounted for as financing transactions.
Mortgage dollar rolls involve the
risk that the market value of the securities the Fund is obligated to repurchase may decline below the repurchase price, or that the counterparty may default on its obligations.
Offsetting of assets and
liabilities
The following table presents the
Fund’s gross and net amount of assets and liabilities available for offset under netting arrangements as well as any related collateral received or pledged by the Fund as of June 30, 2020:
| JPMorgan ($) | Morgan Stanley ($) | Total ($) | |
| Assets | |||
| Centrally cleared credit default swap contracts (a) | - | 8,346 | 8,346 |
| Options purchased puts | 2,944,610 | - | 2,944,610 |
| Total assets | 2,944,610 | 8,346 | 2,952,956 |
| Total financial and derivative net assets | 2,944,610 | 8,346 | 2,952,956 |
| Total collateral received (pledged) (b) | - | - | - |
| Net amount (c) | 2,944,610 | 8,346 | 2,952,956 |
| (a) | Centrally cleared swaps are included within payable/receivable for variation margin on the Statement of Assets and Liabilities. |
| (b) | In some instances, the actual collateral received and/or pledged may be more than the amount shown due to overcollateralization. |
| (c) | Represents the net amount due from/(to) counterparties in the event of default. |
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
| Variable Portfolio – Managed Risk Fund | Semiannual Report 2020 | 23 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Income recognition
Interest income is recorded on an
accrual basis. Market premiums and discounts, including original issue discounts, are amortized and accreted, respectively, over the expected life of the security on all debt securities, unless otherwise noted. The
Fund classifies gains and losses realized on prepayments received on mortgage-backed securities as adjustments to interest income.
The Fund may place a debt security
on non-accrual status and reduce related interest income when it becomes probable that the interest will not be collected and the amount of uncollectible interest can be reasonably estimated. A defaulted debt security
is removed from non-accrual status when the issuer resumes interest payments or when collectibility of interest is reasonably assured.
Corporate actions and dividend
income are recorded on the ex-dividend date.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a
proportionate change in return of capital to shareholders.
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
Income and capital gain
distributions from the Underlying Funds, if any, are recorded on the ex-dividend date.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund is treated as a
partnership for federal income tax purposes, and the Fund does not expect to make regular distributions. The Fund will not be subject to federal income tax, and therefore, there is no provision for federal income
taxes. The partners of the Fund are subject to tax on their distributive share of the Fund’s income and loss. The components of the Fund’s net assets are reported at the partner-level for federal income
tax purposes, and therefore, are not presented in the Statement of Assets and Liabilities.
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
| 24 | Variable Portfolio – Managed Risk Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees and
underlying fund fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager). Under the Management Agreement, the Investment Manager provides the Fund with investment research and advice, as well as
administrative and accounting services. The management services fee is an annual fee that is a blend of (i) 0.02% on assets invested in affiliated underlying funds (including exchange-traded funds and closed-end
funds) that pay a management services fee (or investment advisory services fee, as applicable) to the Investment Manager and (ii) a fee that declines from 0.72% to 0.52%, depending on asset levels, on assets
invested in securities (other than affiliated underlying funds (including exchange-traded funds and closed-end funds) that pay a management services fee (or investment advisory services fee, as applicable) to the
Investment Manager) including other funds advised by the Investment Manager that do not pay a management services fee to the Investment Manager, third party funds, derivatives and individual securities. The annualized
effective management services fee rate for the six months ended June 30, 2020 was 0.13% of the Fund’s average daily net assets.
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 expense and fee
levels and the Fund may own different proportions of Underlying Funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. These expenses are not reflected in the expenses
shown in Statement of Operations and are not included in the ratios to average net assets shown in the Financial Highlights.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. These members of the Board of Trustees
may participate in a Deferred Compensation Plan (the Deferred Plan) which may be terminated at any time. Obligations of the Deferred Plan will be paid solely out of the Fund’s assets, and all amounts payable
under the Deferred Plan constitute a general unsecured obligation of the Fund.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The annualized
effective service fee rate for the six months ended June 30, 2020, was 0.06% of the Fund’s average daily net assets.
| Variable Portfolio – Managed Risk Fund | Semiannual Report 2020 | 25 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. The Board of Trustees has approved, and the Fund has adopted, a distribution plan
(the Plan) which sets the distribution fees for the Fund. These fees are calculated daily and are intended to compensate the Distributor for selling shares of the Fund. The Fund pays a monthly distribution fee to the
Distributor at the maximum annual rate of 0.25% of the average daily net assets attributable to Class 2 shares of the Fund. The Fund pays no distribution and service fees for Class 1 shares.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, including indirect expenses of the Underlying Funds, after giving effect to fees waived/expenses reimbursed and any balance credits
and/or overdraft charges from the Fund’s custodian, do not exceed the following annual rate(s) as a percentage of the class’ average daily net assets:
| May 1, 2020 through April 30, 2021 | Prior to May 1, 2020 | |
| Class 1 | 0.80% | 0.85% |
| Class 2 | 1.05 | 1.10 |
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), transaction costs and brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program
fees and expenses, transaction charges and interest on borrowed money, interest, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This
agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements
described above are not recoverable by the Investment Manager or its affiliates in future periods.
Note 4. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $99,459,754 and $72,955,978, respectively, for the six months ended June 30, 2020, of which $71,861,687 and
$54,048,001, respectively, were U.S. government securities. The amount of purchase and sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 5. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes referred to
as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
| 26 | Variable Portfolio – Managed Risk Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Note 6. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund did not borrow or lend
money under the Interfund Program during the six months ended June 30, 2020.
Note 7. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by Citibank, N.A., HSBC Bank USA, N.A. and JPMorgan Chase Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. The credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment Manager or an affiliated investment manager, severally and
not jointly, permits collective borrowings up to $1 billion. Interest is charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the
one-month LIBOR rate and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a
commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The commitment fee is included in other expenses in the Statement of Operations. This agreement
expires annually in December unless extended or renewed.
The Fund had no borrowings during
the six months ended June 30, 2020.
Note 8. Significant
risks
Derivatives risk
Losses involving derivative
instruments may be substantial, because a relatively small movement in the underlying reference (which is generally the price, rate or other economic indicator associated with a security(ies), commodity, currency or
index or other instrument or asset) may result in a substantial loss for the Fund. In addition to the potential for increased losses, the use of derivative instruments may lead to increased volatility within the Fund.
Derivatives will typically increase the Fund’s exposure to principal risks to which it is otherwise exposed, and may expose the Fund to additional risks, including correlation risk, counterparty risk, hedging
risk, leverage risk, liquidity risk and pricing risk.
Market and environment risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
| Variable Portfolio – Managed Risk Fund | Semiannual Report 2020 | 27 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
The Fund performance may also be
significantly negatively impacted by the economic impact of the coronavirus disease 2019 (COVID-19) pandemic. Public health crisis has become a pandemic that has resulted in, and may continue to result in, significant
global economic and societal disruption and market volatility due to disruptions in market access, resource availability, facilities operations, imposition of tariffs, export controls and supply chain disruption,
among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement and loss in human and other resources. The uncertainty surrounding the magnitude, duration,
reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as
the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and pandemics that may arise in the future – could negatively affect global economies and markets
in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in emerging market countries may be greater due to generally less established healthcare systems,
governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The disruptions caused
by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively impact the Fund’s ability to achieve their investment objectives. Any such event(s) could
have a significant adverse impact on the value and risk profile of the Fund.
The Investment Manager and its
affiliates have systematically implemented strategies to address the operating environment spurred by the COVID-19 pandemic. To promote the safety and security of our employees and to assure the continuity of our
business operations, we have implemented a work from home protocol for virtually all of our employee population, restricted business travel, and provided resources for complying with the guidance from the World Health
Organization, the U.S. Centers for Disease Control and governments. Our operations teams seek to operate without significant disruptions in service. Our pandemic strategy takes into consideration that a pandemic could
be widespread and may occur in multiple waves, affecting different communities at different times with varying levels of severity. We cannot, however, predict the impact that natural or man-made disasters, including
the COVID-19 pandemic, may have on the ability of our employees and third-party service providers to continue ordinary business operations and technology functions over near- or longer-term periods.
Shareholder concentration risk
At June 30, 2020, affiliated
shareholders of record owned 100.0% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 9. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 10. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to
| 28 | Variable Portfolio – Managed Risk Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
perform under their contracts with the Fund, these
proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse
judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial.
| Variable Portfolio – Managed Risk Fund | Semiannual Report 2020 | 29 |
Liquidity Risk
Management Program
Pursuant to Rule 22e-4 under the
1940 Act, the Fund has adopted a liquidity risk management program (Program). The Program’s principal objectives include assessing, managing and periodically reviewing the Fund’s liquidity risk. Liquidity
risk is defined as the risk that the Fund could not meet redemption requests without significant dilution of remaining investors’ interests in the Fund.
The Board has appointed the
Investment Manager as the program administrator for the Fund’s Program. The Investment Manager has delegated oversight of the Program to its Liquidity Risk Management Committee (the Committee). At a board
meeting during the fiscal period, the Committee provided the Board with a report addressing the operations of the program and assessing its adequacy and effectiveness of implementation for the period December 1, 2018,
through December 31, 2019, including:
| • | the Fund had sufficient liquidity to both meet redemptions and operate effectively on behalf of shareholders; |
| • | there were no material changes to the Program during the period; |
| • | the implementation of the Program was effective to manage the Fund’s liquidity risk; and |
| • | the Program operated adequately during the period. |
There can be no assurance that the
Program will achieve its objectives in the future. Please refer to the Fund’s prospectus for more information regarding the Fund’s exposure to liquidity risk and other principal risks to which an
investment in the Fund may be subject.
Board Consideration
and Approval of Management
Agreement
On June 17, 2020, the Board of
Trustees (the Board) and the Trustees who are not interested persons (as defined in the Investment Company Act of 1940) (the Independent Trustees) of Columbia Funds Variable Insurance Trust (the Trust) unanimously
approved the continuation of the Management Agreement (the Management Agreement) with Columbia Management Investment Advisers, LLC (the Investment Manager) with respect to Variable Portfolio – Managed Risk Fund
(the Fund), a series of the Trust. As detailed below, the Board’s Advisory Fees and Expenses Committee (the Committee) and the Board met on multiple occasions to review and discuss, among themselves, with the
management team of the Investment Manager and with an independent fee consultant, materials provided by the Investment Manager, the independent fee consultant and others before determining to approve the continuation
of the Management Agreement.
In connection with their
deliberations regarding the continuation of the Management Agreement, the Committee and the Board evaluated materials requested from the Investment Manager regarding the Fund and the Management Agreement, and
discussed these materials with representatives of the Investment Manager at Committee meetings held on March 10, 2020, April 30, 2020 and June 17, 2020 and at Board meetings held on March 11, 2020 and June 17, 2020.
In addition, the Board and its various committees consider matters bearing on the Management Agreement at other meetings throughout the year and in prior years and meet regularly with senior management of the Trust
and the Investment Manager. Through the Board’s Investment Oversight Committees, Trustees also meet with selected portfolio managers of the funds the Trustees oversee and with other investment personnel at
various times throughout the year. The Committee and the Board also consulted with the independent fee consultant, Fund counsel and the Independent Trustees’ independent legal counsel, who advised on various
matters with respect to the Committee’s and the Board’s considerations and otherwise assisted the Committee and the Board in their deliberations. On June 17, 2020, the Committee recommended that the Board
approve the continuation of the Management Agreement. On June 17, 2020, the Board, including the Independent Trustees, voting separately, unanimously approved the continuation of the Management Agreement for the
Fund.
| 30 | Variable Portfolio – Managed Risk Fund | Semiannual Report 2020 |
Board Consideration and Approval of
Management
Agreement (continued)
The Committee and the Board considered all
information that they, their legal counsel or the Investment Manager believed reasonably necessary to evaluate and to determine whether to recommend for approval or approve the continuation of the Management
Agreement. The information and factors considered by the Committee and the Board in recommending for approval or approving the continuation of the Management Agreement for the Fund included the following:
| • | Information on the investment performance of the Fund relative to the performance of a group of mutual funds determined to be comparable to the Fund by the Investment Manager, as well as performance relative to benchmarks; |
| • | Information on the Fund’s management fees and total expenses, including information comparing the Fund’s expenses to those of a group of comparable mutual funds, as determined by the Investment Manager; |
| • | The Investment Manager’s agreement to contractually limit or cap total operating expenses for the Fund through April 30, 2021 so that total operating expenses (excluding certain fees and expenses, such as transaction costs and certain other investment related expenses, interest, taxes, and infrequent and/or unusual expenses) would not exceed a specified annual rate, as a percentage of the Fund’s net assets; |
| • | The terms and conditions of the Management Agreement; |
| • | The current and proposed terms and conditions of other agreements and arrangements with affiliates of the Investment Manager relating to the operations of the Fund, including agreements with respect to the provision of distribution, transfer agency and shareholder services to the Fund; |
| • | Descriptions of various functions performed by the Investment Manager under the Management Agreement, including portfolio management and portfolio trading practices; |
| • | Information regarding any recently negotiated management fees of similarly-managed portfolios of other institutional clients of the Investment Manager; |
| • | Information regarding the reputation, regulatory history and resources of the Investment Manager, including information regarding senior management, portfolio managers and other personnel; |
| • | Information regarding the capabilities of the Investment Manager with respect to compliance monitoring services, including an assessment of the Investment Manager’s compliance system by the Fund’s Chief Compliance Officer; and |
| • | The profitability to the Investment Manager and its affiliates from their relationships with the Fund. |
Nature, extent and quality of
services provided under the Management Agreement
The Committee and the Board
considered the nature, extent and quality of services provided to the Fund by the Investment Manager and its affiliates under the Management Agreement and under separate agreements for the provision of transfer agency
and shareholder services, and the resources dedicated to the Fund and the other Columbia Funds by the Investment Manager and its affiliates. The Committee and the Board considered, among other things, the Investment
Manager’s ability to attract, motivate and retain highly qualified research, advisory and supervisory investment professionals (including compensation programs for personnel involved in fund management,
reputation and other attributes), the portfolio management services provided by those investment professionals, and the quality of the Investment Manager’s investment research capabilities and trade execution
services. The Committee and the Board also considered the potential benefits to shareholders of investing in a mutual fund that is part of a fund complex offering exposure to a variety of asset classes and investment
disciplines and providing a variety of fund and shareholder services.
The Committee and the Board also
considered the professional experience and qualifications of the senior personnel of the Investment Manager, which included consideration of the Investment Manager’s experience with funds using an investment
strategy similar to that used by the Investment Manager for the Fund. The Committee and the Board noted the compliance programs of and the compliance-related resources provided to the Fund by the Investment Manager
and its affiliates and the resources dedicated by the Investment Manager and its affiliates to risk management, and considered the Investment Manager’s ability to provide administrative services to the Fund and
coordinate the activities of the Fund’s other service
| Variable Portfolio – Managed Risk Fund | Semiannual Report 2020 | 31 |
Board Consideration and Approval of
Management
Agreement (continued)
providers. After reviewing these and related
factors, the Committee and the Board concluded, within the context of their overall conclusions, that the nature, extent and quality of the services provided to the Fund under the Management Agreement supported the
continuation of the Management Agreement.
Investment performance
The Committee and the Board
reviewed information about the performance of the Fund over various time periods, including performance information relative to benchmarks, information that compared the performance of the Fund to the performance of a
group of comparable mutual funds as determined by the Investment Manager, and information and analysis provided by the independent fee consultant. The Committee and the Board also reviewed a description of the
Investment Manager’s methodology for identifying the Fund’s peer groups for purposes of performance and expense comparisons. Although the Fund’s performance lagged that of a relevant peer group for
certain (although not necessarily all) periods, the Committee and the Board concluded that other factors relevant to performance were sufficient, in light of other considerations, to support continuation of the
Management Agreement. Those factors included one or more of the following: (i) that the Fund’s performance, although lagging in certain recent periods, was stronger over the longer term; (ii) that the
underperformance was attributable, to a significant extent, to investment decisions that were reasonable and consistent with the Fund’s investment strategy and policies and that the Fund was performing within a
reasonable range of expectations, given those investment decisions, market conditions and the Fund’s investment strategy; (iii) that the Fund’s performance was competitive when compared to other relevant
performance benchmarks or peer groups; and (iv) that the Investment Manager had taken or was taking steps designed to help improve the Fund’s investment performance, including, but not limited to, replacing
portfolio managers, enhancing the resources supporting the portfolio managers, or modifying investment strategies.
The Committee and the Board noted
that, through December 31, 2019, the Fund’s performance was in the seventieth percentile (where the best performance would be in the first percentile) of its category selected by the Investment Manager for the
purposes of performance comparisons for the one-year period.
The Committee and the Board also
considered the Investment Manager’s performance and reputation generally, the Investment Manager’s historical responsiveness to Board concerns about performance, and the Investment Manager’s
willingness to take steps intended to improve performance. After reviewing these and related factors, the Committee and the Board concluded, within the context of their overall conclusions, that the performance of the
Fund and the Investment Manager was sufficient, in light of other considerations, to support the continuation of the Management Agreement.
Investment management fee rates
and other expenses
The Committee and the Board
considered the management fees charged to the Fund under the Management Agreement as well as the total expenses incurred by the Fund. In assessing the reasonableness of the fees under the Management Agreement, the
Committee and the Board considered, among other information, the Fund’s total expense ratio as a percentage of average daily net assets. The Committee and the Board considered data provided by the Investment
Manager and the independent fee consultant. The Committee and the Board noted that, as of December 31, 2019, the Fund’s actual management fee and net total expense ratio were ranked in the first and third
quintiles, respectively, (where the lowest fees and expenses would be in the first quintile) against the Fund’s expense universe as determined by the Investment Manager for purposes of expense comparison. The
Committee and the Board also took into account the fee waiver and expense limitation arrangements agreed to by the Investment Manager, as noted above.
The Committee and the Board also
received and considered information about the management fees charged by the Investment Manager to institutional accounts. In considering the fees charged to those accounts, the Committee and the Board took into
account, among other things, the Investment Manager’s representations about the differences between managing mutual funds as compared to other types of accounts, including differences in the services provided,
differences in the risk profile of such business for the Investment Manager and the additional resources required to manage mutual funds effectively. The Committee and the Board also received and considered
information about the fees charged by the Investment Manager for sub-advisory services it provides to comparable unaffiliated funds. In evaluating the Fund’s management fees, the Committee and the Board also
took into account the demands, complexity and quality of the investment management of the Fund.
| 32 | Variable Portfolio – Managed Risk Fund | Semiannual Report 2020 |
Board Consideration and Approval of
Management
Agreement (continued)
After reviewing these and related factors, the
Committee and the Board concluded, within the context of their overall conclusions, that the management fee rates and expenses of the Fund, in light of other considerations, supported the continuation of the
Management Agreement.
Costs of services provided and
profitability
The Committee and the Board also
took note of the costs the Investment Manager and its affiliates incur in connection with the services provided and the profitability to the Investment Manager and its affiliates from their relationships with the
Fund, and the efforts undertaken by the Investment Manager and its affiliates to manage efficiently their costs to provide such services.
The Committee and the Board also
considered the compensation directly or indirectly received by the Investment Manager’s affiliates in connection with their relationships with the Fund. The Committee and the Board reviewed information provided
by management as to the profitability to the Investment Manager and its affiliates of their relationships with the Fund, information about the allocation of expenses used to calculate profitability, and comparisons of
profitability levels realized in 2019 to profitability levels realized in 2018. When reviewing profitability, the Committee and the Board also considered court cases in which adviser profitability was an issue in
whole or in part, the performance of similarly managed funds, the performance of the Fund, and the expense ratio of the Fund. In addition, the Committee and the Board considered information provided by the Investment
Manager regarding the Investment Manager’s financial condition and comparing its profitability to that of other asset management firms that are, or are subsidiaries of, publicly traded companies. In this regard,
the Committee and the Board also considered data provided by the independent fee consultant.
After reviewing these and related
factors, the Committee and the Board concluded, within the context of their overall conclusions, that the costs of services provided and the profitability to the Investment Manager and its affiliates from their
relationships with the Fund supported the continuation of the Management Agreement.
Economies of scale
The Committee and the Board
considered the potential existence of economies of scale in the provision by the Investment Manager of services to the Fund, to groups of related funds, and to the Investment Manager’s investment advisory
clients as a whole, and whether those economies of scale were shared with the Fund through breakpoints in investment management fees or other means, such as expense limitation arrangements and additional investments
by the Investment Manager in investment, trading, compliance and other resources. The Committee and the Board noted that the management fee schedules for the Fund contained breakpoints that would reduce the fee rate
on assets above specified threshold levels.
In considering these matters, the
Committee and the Board also considered the costs of the services provided and the profitability to the Investment Manager and its affiliates from their relationships with the Fund, as noted above. After reviewing
these and related factors, the Committee and the Board concluded, within the context of their overall conclusions, that the extent to which any economies of scale were expected to be shared with the Fund supported the
continuation of the Management Agreement.
Other benefits to the Investment
Manager
The Committee and the Board
received and considered information regarding “fall-out” or ancillary benefits received by the Investment Manager and its affiliates as a result of their relationships with the Fund, such as the engagement
of the Investment Manager’s affiliates to provide distribution, transfer agency and shareholder services to the Fund. In this regard, among other matters, the Committee and the Board considered that the
Fund’s distributor retains a portion of the distribution fees from the Fund. The Committee and the Board also considered the benefits of research made available to the Investment Manager by reason of brokerage
commissions generated by the Fund’s securities transactions, and reviewed information about the Investment Manager’s practices with respect to considering brokerage and research services when allocating
portfolio transactions. In this connection, the Board also noted that the amount of research made available to the Investment Manager by reason of brokerage commissions had been declining over time, and may decline
further. The Committee and the Board also considered the tax benefits provided to affiliates of the Investment Manager as a result of the election by certain Funds to be taxed as partnerships. The Committee and the
Board recognized that the Investment Manager’s profitability would be somewhat lower without these benefits.
| Variable Portfolio – Managed Risk Fund | Semiannual Report 2020 | 33 |
Board Consideration and Approval of
Management
Agreement (continued)
Conclusion
The Committee and the Board
reviewed all of the above considerations in reaching their decisions to recommend or approve the continuation of the Management Agreement. In their deliberations, the Trustees did not identify any particular
information that was all-important or controlling, and individual Trustees may have attributed different weights to the various factors. Based on their evaluation of all factors that they deemed to be material,
including those factors described above, and assisted by the advice of independent legal counsel, the Board, including the Independent Trustees, voting separately, unanimously approved the continuation of the
Management Agreement.
Results of Meeting of
Shareholders
At a Joint Special Meeting of
Shareholders held on April 16, 2020, shareholders of Columbia Funds Variable Insurance Trust elected each of the ten nominees for the trustees to the Board of Trustees of Columbia Funds Variable Insurance Trust, each
to hold office until he or she dies, resigns or is removed or, if sooner, until the next meeting of shareholders called for the purpose of electing trustees and until the election and qualification of his or her
successor, as follows:
| Trustee | Votes For | Votes Withheld | Abstentions |
| Janet L. Carrig | 26,231,108,809 | 1,129,334,152 | 0 |
| J. Kevin Connaughton | 26,249,644,638 | 1,110,798,323 | 0 |
| Olive Darragh | 26,323,990,658 | 1,036,452,304 | 0 |
| Douglas A. Hacker | 26,255,762,920 | 1,104,680,042 | 0 |
| Nancy T. Lukitsh | 26,332,381,722 | 1,028,061,240 | 0 |
| David M. Moffett | 26,252,719,395 | 1,107,723,567 | 0 |
| John J. Neuhauser | 26,222,694,456 | 1,137,748,505 | 0 |
| Christopher O. Petersen | 26,265,703,212 | 1,094,739,749 | 0 |
| Patrick J. Simpson | 26,222,908,024 | 1,137,534,938 | 0 |
| Natalie A. Trunow | 26,340,164,732 | 1,020,278,229 | 0 |
| 34 | Variable Portfolio – Managed Risk Fund | Semiannual Report 2020 |
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Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 225 Franklin Street, Boston, MA
02110-2804
© 2020 Columbia Management Investment
Advisers, LLC.
C-2031 AP (8/20)
Variable Portfolio
– Managed Risk U.S. Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts offered by the separate accounts of participating insurance companies as well as qualified pension and
retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
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| 10 | |
| 11 | |
| 12 | |
| 14 | |
| 16 | |
| 29 | |
| 29 | |
| 33 |
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which Variable Portfolio – Managed Risk U.S. Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional Information
(SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov. Information
regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge by visiting
columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT, and for reporting periods ended prior to March 31, 2019, on Form N-Q. The Fund’s Form N-Q and Form N-PORT
filings are available on the SEC’s website at sec.gov. The Fund’s complete schedule of portfolio holdings, as filed on Form N-Q or Form N-PORT, can also be obtained without charge, upon request, by calling
800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
225 Franklin Street
Boston, MA 02110
Fund distributor
Columbia Management Investment Distributors,
Inc.
225 Franklin Street
Boston, MA 02110
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Variable Portfolio – Managed Risk U.S.
Fund | Semiannual Report 2020
Fund at a Glance
(Unaudited)
(Unaudited)
Investment objective
The Fund
pursues total return while seeking to manage the Fund’s exposure to equity market volatility.
Portfolio management
Brian Virginia
Lead Portfolio Manager
Managed Fund since 2017
Anwiti Bahuguna, Ph.D.
Portfolio Manager
Managed Fund since 2017
David Weiss, CFA
Portfolio Manager
Managed Fund since 2017
Joshua Kutin, CFA
Portfolio Manager
Managed Fund since 2018
| Variable Portfolio – Managed Risk U.S. Fund | Semiannual Report 2020 | 3 |
Fund at a Glance (continued)
(Unaudited)
(Unaudited)
| Portfolio Allocation (%) (at June 30, 2020) | |
| Allocations to Underlying Funds | |
| Equity Funds | 48.0 |
| U.S. Large Cap | 48.0 |
| Exchange-Traded Fixed Income Funds | 8.5 |
| Investment Grade | 8.5 |
| Fixed Income Funds | 25.8 |
| Investment Grade | 25.8 |
| Allocations to Tactical Assets | |
| Money Market Fund Shares Held to Cover Open Derivatives Instruments(a) | 4.4 |
| Options Purchased Puts | 1.2 |
| Residential Mortgage-Backed Securities - Agency | 12.1 |
| Total | 100.0 |
| (a) | Includes investments in Money Market Funds (amounting to $10.4 million) which have been segregated to cover obligations relating to the Fund’s investment in derivatives as part of its tactical allocation strategy. For a description of the Fund’s investments in derivatives, see Investments in derivatives following the Portfolio of Investments and Note 2 to the Notes to Financial Statements. |
Percentages indicated are based upon
total investments including options purchased and excluding all other investments in derivatives, if any. The Fund’s portfolio composition is subject to change.
| 4 | Variable Portfolio – Managed Risk U.S. Fund | Semiannual Report 2020 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount 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 results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
In addition to the ongoing expenses
which the Fund bears directly, the Fund’s shareholders indirectly bear the Fund’s allocable share of the costs and expenses of each underlying fund in which the Fund invests. You can also estimate the
effective expenses paid during the period, which includes the indirect fees associated with investing in the underlying funds, by using the amounts listed in the "Effective expenses paid during the period" column.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
| January 1, 2020 — June 30, 2020 | ||||||||||
| Account value at the beginning of the period ($) | Account value at the end of the period ($) | Expenses paid during the period ($) | Fund’s annualized expense ratio (%) | Effective expenses paid during the period ($) | Fund’s effective annualized expense ratio (%) | |||||
| Actual | Hypothetical | Actual | Hypothetical | Actual | Hypothetical | Actual | Actual | Hypothetical | Actual | |
| Class 1 | 1,000.00 | 1,000.00 | 986.60 | 1,023.67 | 1.19 | 1.21 | 0.24 | 3.75 | 3.82 | 0.76 |
| Class 2 | 1,000.00 | 1,000.00 | 984.90 | 1,022.43 | 2.42 | 2.46 | 0.49 | 4.98 | 5.08 | 1.01 |
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 366.
Effective expenses paid during the
period and the Fund’s effective annualized expense ratio include expenses borne directly to the class plus the Fund’s pro rata portion of the ongoing expenses charged by the underlying funds using the
expense ratio of each class of the underlying funds as of the underlying fund’s most recent shareholder report.
| Variable Portfolio – Managed Risk U.S. Fund | Semiannual Report 2020 | 5 |
Portfolio of Investments
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
(Percentages represent value of
investments compared to net assets)
Investments in securities
At June 30, 2020,
securities and/or cash totaling $5,093,670 were pledged as collateral.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 6 | Variable Portfolio – Managed Risk U.S. Fund | Semiannual Report 2020 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Investments in derivatives
| Long futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| S&P 500 Index E-mini | 74 | 09/2020 | USD | 11,433,740 | 330,059 | — |
| U.S. Long Bond | 34 | 09/2020 | USD | 6,071,125 | 19,685 | — |
| U.S. Treasury 10-Year Note | 44 | 09/2020 | USD | 6,123,563 | 15,617 | — |
| U.S. Treasury 2-Year Note | 20 | 09/2020 | USD | 4,416,563 | 481 | — |
| U.S. Treasury 5-Year Note | 91 | 09/2020 | USD | 11,442,539 | 24,462 | — |
| U.S. Ultra Treasury Bond | 22 | 09/2020 | USD | 4,799,438 | — | (18,091) |
| Total | 390,304 | (18,091) | ||||
| Short futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| S&P 500 Index E-mini | (270) | 09/2020 | USD | (41,717,700) | — | (938,337) |
| Put option contracts purchased | ||||||||
| Description | Counterparty | Trading currency | Notional amount | Number of contracts | Exercise price/Rate | Expiration date | Cost ($) | Value ($) |
| S&P 500 Index | JPMorgan | USD | 32,863,074 | 106 | 2,500.00 | 12/17/2021 | 1,788,020 | 1,945,100 |
| S&P 500 Index | JPMorgan | USD | 7,440,696 | 24 | 2,600.00 | 12/17/2021 | 413,415 | 541,680 |
| S&P 500 Index | JPMorgan | USD | 7,130,667 | 23 | 2,400.00 | 12/17/2021 | 417,107 | 366,620 |
| Total | 2,618,542 | 2,853,400 | ||||||
| Cleared credit default swap contracts - sell protection | ||||||||||||
| Reference entity | Counterparty | Maturity date | Receive fixed rate (%) | Payment frequency | Implied credit spread (%)* | Notional currency | Notional amount | Value ($) | Upfront payments ($) | Upfront receipts ($) | Unrealized appreciation ($) | Unrealized depreciation ($) |
| Markit CDX North America Investment Grade Index, Series 34 | Morgan Stanley | 06/20/2025 | 1.000 | Quarterly | 0.762 | USD | 11,000,000 | 84,028 | — | — | 84,028 | — |
| * | Implied credit spreads, represented in absolute terms, utilized in determining the market value of credit default swap agreements on corporate or sovereign issues as of period end serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement. |
Notes to Portfolio of
Investments
| (a) | As defined in the Investment Company Act of 1940, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the period ended June 30, 2020 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Capital gain distributions($) | Realized gain (loss)($) | Dividends — affiliated issuers ($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.253% | |||||||||
| 12,586,187 | 56,054,106 | (58,250,939) | (359) | 10,388,995 | — | 938 | 49,767 | 10,388,995 | |
| Columbia Variable Portfolio – Disciplined Core Fund, Class 1 Shares | |||||||||
| 31,823,122 | 5,806,141 | (2,901,888) | (237,899) | 34,489,476 | — | (216,283) | — | 606,142 | |
| Columbia Variable Portfolio – Intermediate Bond Fund, Class 1 Shares | |||||||||
| 23,805,850 | 2,644,865 | (2,082,102) | 1,572,583 | 25,941,196 | — | 5,735 | — | 2,283,556 | |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – Managed Risk U.S. Fund | Semiannual Report 2020 | 7 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Notes
to Portfolio of Investments (continued)
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Capital gain distributions($) | Realized gain (loss)($) | Dividends — affiliated issuers ($) | End of period shares |
| CTIVP® – Los Angeles Capital Large Cap Growth Fund, Class 1 Shares | |||||||||
| 19,867,017 | 1,920,210 | (1,699,301) | 1,968,892 | 22,056,818 | — | 52,529 | — | 579,985 | |
| CTIVP® – T. Rowe Price Large Cap Value Fund, Class 1 Shares | |||||||||
| 19,908,049 | 6,659,366 | (1,883,097) | (3,231,248) | 21,453,070 | — | (399,164) | — | 1,004,357 | |
| CTIVP® – Wells Fargo Short Duration Government Fund, Class 1 Shares | |||||||||
| 7,941,018 | 1,342,425 | (906,728) | 243,021 | 8,619,736 | — | 15,395 | — | 813,183 | |
| Variable Portfolio - Partners Core Bond Fund, Class 1 Shares | |||||||||
| 23,811,408 | 3,478,468 | (2,752,416) | 1,404,250 | 25,941,710 | — | 61,666 | — | 2,194,730 | |
| Variable Portfolio - Partners Core Equity Fund, Class 1 Shares | |||||||||
| 31,837,731 | 6,221,448 | (2,777,303) | (841,486) | 34,440,390 | — | (228,576) | — | 1,512,534 | |
| Total | 171,580,382 | 877,754 | 183,331,391 | — | (707,760) | 49,767 | |||
| (b) | Non-income producing investment. |
| (c) | Represents a security purchased on a when-issued basis. |
| (d) | The rate shown is the seven-day current annualized yield at June 30, 2020. |
Abbreviation Legend
| TBA | To Be Announced |
Currency Legend
| USD | US Dollar |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Certain investments that have been
measured at fair value using the net asset value (NAV) per share (or its equivalent) are not categorized in the fair value hierarchy. The fair value amounts presented in the table are intended to reconcile the fair
value hierarchy to the amounts presented in the Portfolio of Investments. The Variable Portfolios serve as investment vehicles for variable annuity contracts and variable life insurance policies. Principle investment
strategies within these Variable Portfolios vary based on the Portfolios investment objective. Investments in the Variable Portfolios may be redeemed on a daily basis without restriction.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 8 | Variable Portfolio – Managed Risk U.S. Fund | Semiannual Report 2020 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Fair value measurements (continued)
Under the direction of the Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
Under the direction of the Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at June 30, 2020:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Assets at NAV ($) | Total ($) | |
| Investments in Securities | |||||
| Equity Funds | — | — | — | 112,439,754 | 112,439,754 |
| Exchange-Traded Fixed Income Funds | 19,815,230 | — | — | — | 19,815,230 |
| Fixed Income Funds | — | — | — | 60,502,642 | 60,502,642 |
| Residential Mortgage-Backed Securities - Agency | — | 28,231,954 | — | — | 28,231,954 |
| Options Purchased Puts | 2,853,400 | — | — | — | 2,853,400 |
| Money Market Funds | 10,388,995 | — | — | — | 10,388,995 |
| Total Investments in Securities | 33,057,625 | 28,231,954 | — | 172,942,396 | 234,231,975 |
| Investments in Derivatives | |||||
| Asset | |||||
| Futures Contracts | 390,304 | — | — | — | 390,304 |
| Swap Contracts | — | 84,028 | — | — | 84,028 |
| Liability | |||||
| Futures Contracts | (956,428) | — | — | — | (956,428) |
| Total | 32,491,501 | 28,315,982 | — | 172,942,396 | 233,749,879 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The Fund’s assets assigned to
the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical
assets.
Futures contracts and swap contracts
are valued at unrealized appreciation (depreciation).
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – Managed Risk U.S. Fund | Semiannual Report 2020 | 9 |
Statement of Assets and Liabilities
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $46,634,442) | $48,047,184 |
| Affiliated issuers (cost $167,312,699) | 183,331,391 |
| Options purchased (cost $2,618,542) | 2,853,400 |
| Margin deposits on: | |
| Futures contracts | 4,679,400 |
| Swap contracts | 414,270 |
| Receivable for: | |
| Investments sold | 124,258 |
| Dividends | 2,237 |
| Interest | 31,026 |
| Variation margin for futures contracts | 157,562 |
| Variation margin for swap contracts | 15,302 |
| Trustees’ deferred compensation plan | 14,294 |
| Total assets | 239,670,324 |
| Liabilities | |
| Payable for: | |
| Investments purchased on a delayed delivery basis | 28,278,108 |
| Capital shares purchased | 146,186 |
| Variation margin for futures contracts | 622,094 |
| Management services fees | 844 |
| Distribution and/or service fees | 1,431 |
| Service fees | 10,311 |
| Compensation of board members | 2,482 |
| Compensation of chief compliance officer | 14 |
| Other expenses | 17,738 |
| Trustees’ deferred compensation plan | 14,294 |
| Total liabilities | 29,093,502 |
| Net assets applicable to outstanding capital stock | $210,576,822 |
| Represented by | |
| Trust capital | $210,576,822 |
| Total - representing net assets applicable to outstanding capital stock | $210,576,822 |
| Class 1 | |
| Net assets | $2,745 |
| Shares outstanding | 233 |
| Net asset value per share(a) | $11.81 |
| Class 2 | |
| Net assets | $210,574,077 |
| Shares outstanding | 17,894,954 |
| Net asset value per share | $11.77 |
| (a) | Net asset value per share rounds to this amount due to fractional shares outstanding. |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 10 | Variable Portfolio – Managed Risk U.S. Fund | Semiannual Report 2020 |
Statement of Operations
Six Months Ended June 30, 2020 (Unaudited)
Six Months Ended June 30, 2020 (Unaudited)
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $191,476 |
| Dividends — affiliated issuers | 49,767 |
| Interest | 2,784 |
| Total income | 244,027 |
| Expenses: | |
| Management services fees | 128,823 |
| Distribution and/or service fees | |
| Class 2 | 241,898 |
| Service fees | 58,196 |
| Compensation of board members | 7,905 |
| Custodian fees | 11,033 |
| Printing and postage fees | 5,651 |
| Audit fees | 14,669 |
| Legal fees | 2,324 |
| Compensation of chief compliance officer | 33 |
| Other | 4,370 |
| Total expenses | 474,902 |
| Net investment loss | (230,875) |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 268,880 |
| Investments — affiliated issuers | (707,760) |
| Futures contracts | (7,525,701) |
| Options purchased | 4,326,716 |
| Swap contracts | 17,909 |
| Net realized loss | (3,619,956) |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | 746,612 |
| Investments — affiliated issuers | 877,754 |
| Futures contracts | (859,715) |
| Options purchased | 596,338 |
| Swap contracts | 84,028 |
| Net change in unrealized appreciation (depreciation) | 1,445,017 |
| Net realized and unrealized loss | (2,174,939) |
| Net decrease in net assets resulting from operations | $(2,405,814) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Variable Portfolio – Managed Risk U.S. Fund | Semiannual Report 2020 | 11 |
Statement of Changes in Net Assets
| Six Months Ended June 30, 2020 (Unaudited) | Year Ended December 31, 2019 | |
| Operations | ||
| Net investment income (loss) | $(230,875) | $804,178 |
| Net realized gain (loss) | (3,619,956) | 863,426 |
| Net change in unrealized appreciation (depreciation) | 1,445,017 | 19,028,706 |
| Net increase (decrease) in net assets resulting from operations | (2,405,814) | 20,696,310 |
| Increase in net assets from capital stock activity | 26,778,706 | 85,388,406 |
| Total increase in net assets | 24,372,892 | 106,084,716 |
| Net assets at beginning of period | 186,203,930 | 80,119,214 |
| Net assets at end of period | $210,576,822 | $186,203,930 |
| Six Months Ended | Year Ended | |||
| June 30, 2020 (Unaudited) | December 31, 2019 (a) | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | — | — | 233 | 2,500 |
| Net increase | — | — | 233 | 2,500 |
| Class 2 | ||||
| Subscriptions | 2,466,241 | 28,452,123 | 7,945,770 | 88,580,629 |
| Redemptions | (152,048) | (1,673,417) | (293,990) | (3,194,723) |
| Net increase | 2,314,193 | 26,778,706 | 7,651,780 | 85,385,906 |
| Total net increase | 2,314,193 | 26,778,706 | 7,652,013 | 85,388,406 |
| (a) | Class 1 shares are based on operations from February 20, 2019 (commencement of operations) through the stated period end. |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 12 | Variable Portfolio – Managed Risk U.S. Fund | Semiannual Report 2020 |
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BLANK]
| Variable Portfolio – Managed Risk U.S. Fund | Semiannual Report 2020 | 13 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income (loss) | Net realized and unrealized gain (loss) | Total from investment operations | |
| Class 1 | ||||
| Six Months Ended 6/30/2020 (Unaudited) | $11.97 | 0.01 | (0.17) | (0.16) |
| Year Ended 12/31/2019(d) | $10.75 | 0.10 | 1.12 | 1.22 |
| Class 2 | ||||
| Six Months Ended 6/30/2020 (Unaudited) | $11.95 | (0.01) | (0.17) | (0.18) |
| Year Ended 12/31/2019 | $10.10 | 0.07 | 1.78 | 1.85 |
| Year Ended 12/31/2018 | $10.47 | 0.04 | (0.41) | (0.37) |
| Year Ended 12/31/2017(e) | $10.00 | (0.01) | 0.48 | 0.47 |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Annualized. |
| (d) | Class 1 shares commenced operations on February 20, 2019. Per share data and total return reflect activity from that date. |
| (e) | The Fund commenced operations on September 12, 2017. Per share data and total return reflect activity from that date. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 14 | Variable Portfolio – Managed Risk U.S. Fund | Semiannual Report 2020 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income (loss) ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Six Months Ended 6/30/2020 (Unaudited) | $11.81 | (1.34%) | 0.24%(c) | 0.24%(c) | 0.02%(c) | 43% | $3 |
| Year Ended 12/31/2019(d) | $11.97 | 11.35% | 0.25%(c) | 0.25%(c) | 1.02%(c) | 24% | $3 |
| Class 2 | |||||||
| Six Months Ended 6/30/2020 (Unaudited) | $11.77 | (1.51%) | 0.49%(c) | 0.49%(c) | (0.24%)(c) | 43% | $210,574 |
| Year Ended 12/31/2019 | $11.95 | 18.32% | 0.52% | 0.52% | 0.61% | 24% | $186,201 |
| Year Ended 12/31/2018 | $10.10 | (3.53%) | 0.67% | 0.58% | 0.41% | 45% | $80,119 |
| Year Ended 12/31/2017(e) | $10.47 | 4.70% | 1.19%(c) | 0.52%(c) | (0.26%)(c) | 109% | $12,190 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – Managed Risk U.S. Fund | Semiannual Report 2020 | 15 |
Notes to Financial Statements
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Note 1. Organization
Variable Portfolio –
Managed Risk U.S. Fund (the Fund), a series of Columbia Funds Variable Insurance Trust (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act),
as an open-end management investment company organized as a Massachusetts business trust.
The Fund is a
“fund-of-funds”, investing significantly in affiliated funds managed by the Investment Manager, a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial), its affiliates, or
third-party advised (unaffiliated) funds, including exchange-traded funds (collectively, Underlying Funds). The Fund is exposed to the same risks as the Underlying Funds in direct proportion to the allocation of its
assets among the Underlying Funds. For information on the investment strategies and risks of the Underlying Funds, please refer to the Fund’s current prospectus and the prospectuses of the Underlying Funds,
which are available, free of charge, from the Securities and Exchange Commission website at www.sec.gov.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1 and Class 2 shares to separate accounts funding variable annuity contracts (Contracts) issued by affiliated life insurance companies (Participating
Insurance Companies) and other qualified institutional investors (Qualified Investors) authorized by Columbia Management Investment Distributors, Inc. (the Distributor). You may not buy (nor will you own) shares of
the Fund directly. You may invest by buying a Contract.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on any
exchange are valued at the mean between the closing bid and asked prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Asset- and mortgage-backed
securities are generally valued by pricing services, which utilize pricing models that incorporate the securities’ cash flow and loan performance data. These models also take into account available market data,
including trades, market quotations, and benchmark yield curves for identical or similar securities. Factors used to identify similar securities may include, but are not limited to, issuer, collateral type, vintage,
prepayment speeds, collateral performance, credit ratings, credit enhancement and expected life. Asset-backed securities for which quotations are readily available may also be valued based upon an over-the-counter or
exchange bid quote from an approved independent broker-dealer.
Investments in the Underlying Funds
(other than ETFs) are valued at the latest net asset value reported by those companies as of the valuation time.
Futures and options on futures
contracts are valued based upon the settlement price at the close of regular trading on their principal exchanges or, in the absence of transactions, at the mean of the latest quoted bid and ask prices.
| 16 | Variable Portfolio – Managed Risk U.S. Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Option contracts are valued at the
mean of the latest quoted bid and ask prices on their primary exchanges. Option contracts, including over-the-counter option contracts, with no readily available market quotations are valued using mid-market
evaluations from independent third-party vendors.
Swap transactions are valued
through an independent pricing service or broker, or if neither is available, through an internal model based upon observable inputs.
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Derivative instruments
The Fund invests in certain
derivative instruments, as detailed below, to meet its investment objectives. Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more securities,
currencies, commodities, indices, or other assets or instruments. Derivatives may be used to increase investment flexibility (including to maintain cash reserves while maintaining desired exposure to certain assets),
for risk management (hedging) purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain investment risks,
such as foreign currency exchange rate risk, interest rate risk and credit risk. Derivatives may involve various risks, including the potential inability of the counterparty to fulfill its obligations under the terms
of the contract, the potential for an illiquid secondary market (making it difficult for the Fund to sell or terminate, including at favorable prices) and the potential for market movements which may expose the Fund
to gains or losses in excess of the amount shown in the Statement of Assets and Liabilities. The notional amounts of derivative instruments, if applicable, are not recorded in the financial statements.
A derivative instrument may suffer
a marked-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform its
obligations under the contract. The Fund’s risk of loss from counterparty credit risk on over-the-counter derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by
the Fund and the amount of any variation margin held by the counterparty, plus any replacement costs or related amounts. With exchange-traded or centrally cleared derivatives, there is reduced counterparty credit risk
to the Fund since the clearinghouse or central counterparty (CCP) provides some protection in the case of clearing member default. The clearinghouse or CCP stands between the buyer and the seller of the contract;
therefore, additional counterparty credit risk is failure of the clearinghouse or CCP. However, credit risk still exists in exchange-traded or centrally cleared derivatives with respect to initial and variation margin
that is held in a broker’s customer account. While brokers are required to segregate customer margin from their own assets, in the event that a broker becomes insolvent or goes into bankruptcy and at that time
there is a shortfall in the aggregate amount of margin held by the broker for all its clients, U.S. bankruptcy laws will typically allocate that shortfall on a pro-rata basis across all the broker’s customers
(including the Fund), potentially resulting in losses to the Fund.
In order to better define its
contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement)
or similar agreement with its derivatives contract counterparties. An ISDA Master Agreement is an agreement between the Fund and a counterparty that governs over-the-counter derivatives and typically contains, among
other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset with the counterparty
certain derivative instrument’s payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically
| Variable Portfolio – Managed Risk U.S. Fund | Semiannual Report 2020 | 17 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
permit a single net payment in the event of
default (close-out netting), including the bankruptcy or insolvency of the counterparty. Note, however, that bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions
against the right of offset or netting in bankruptcy, insolvency or other events.
Collateral (margin) requirements
differ by type of derivative. Margin requirements are established by the clearinghouse or CCP for exchange-traded and centrally cleared derivatives. Brokers can ask for margin in excess of the minimum in certain
circumstances. Collateral terms are contract specific for over-the-counter derivatives. For over-the-counter derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by
netting the marked-to-market amount for each transaction under such agreement and comparing that amount to the value of any variation margin currently pledged by the Fund and/or the counterparty. Generally, the amount
of collateral due from or to a party has to exceed a minimum transfer amount threshold (e.g., $250,000) before a transfer has to be made. To the extent amounts due to the Fund from its counterparties are not fully
collateralized, contractually or otherwise, the Fund bears the risk of loss from counterparty nonperformance. The Fund may also pay interest expense on cash collateral received from the broker. Any interest expense
paid by the Fund is shown on the Statement of Operations. The Fund attempts to mitigate counterparty risk by only entering into agreements with counterparties that it believes have the financial resources to honor
their obligations and by monitoring the financial stability of those counterparties.
Certain ISDA Master Agreements
allow counterparties of over-the-counter derivatives transactions to terminate derivatives contracts prior to maturity in the event the Fund’s net asset value declines by a stated percentage over a specified
time period or if the Fund fails to meet certain terms of the ISDA Master Agreement, which would cause the Fund to accelerate payment of any net liability owed to the counterparty. The Fund also has termination rights
if the counterparty fails to meet certain terms of the ISDA Master Agreement. In determining whether to exercise such termination rights, the Fund would consider, in addition to counterparty credit risk, whether
termination would result in a net liability owed from the counterparty.
For financial reporting purposes,
the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statement of Assets and Liabilities.
Futures contracts
Futures contracts are
exchange-traded and represent commitments for the future purchase or sale of an asset at a specified price on a specified date. The Fund bought and sold futures contracts to produce incremental earnings, to manage the
duration and yield curve exposure of the Fund versus the benchmark, to manage exposure to movements in interest rates, to manage exposure to the securities market and to maintain appropriate equity market exposure
while keeping sufficient cash to accommodate daily redemptions. These instruments may be used for other purposes in future periods. Upon entering into futures contracts, the Fund bears risks that it may not achieve
the anticipated benefits of the futures contracts and may realize a loss. Additional risks include counterparty credit risk, the possibility of an illiquid market, and that a change in the value of the contract or
option may not correlate with changes in the value of the underlying asset.
Upon entering into a futures
contract, the Fund deposits cash or securities with the broker, known as a futures commission merchant (FCM), in an amount sufficient to meet the initial margin requirement. The initial margin deposit must be
maintained at an established level over the life of the contract. Cash deposited as initial margin is recorded in the Statement of Assets and Liabilities as margin deposits. Securities deposited as initial margin are
designated in the Portfolio of Investments. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily change in the contract value and are
recorded as variation margin receivable or payable and are offset in unrealized gains or losses. The Fund recognizes a realized gain or loss when the contract is closed or expires. Futures contracts involve, to
varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities.
Options contracts
Options are contracts which entitle
the holder to purchase or sell securities or other identified assets at a specified price, or in the case of index option contracts, to receive or pay the difference between the index value and the strike price of the
index option contract. Option contracts can be either exchange-traded or over-the-counter. The Fund purchased option contracts to produce incremental earnings, to decrease the Fund’s exposure to equity market
risk and to increase return on investments and to facilitate buying and selling of securities for investments. These instruments may be used for other
| 18 | Variable Portfolio – Managed Risk U.S. Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
purposes in future periods. Completion of
transactions for option contracts traded in the over-the-counter market depends upon the performance of the other party. Cash collateral may be collected or posted by the Fund to secure certain over-the-counter option
contract trades. Cash collateral held or posted by the Fund for such option contract trades must be returned to the broker or the Fund upon closure, exercise or expiration of the contract.
Options contracts purchased are
recorded as investments. When the Fund writes an options contract, the premium received is recorded as an asset and an amount equivalent to the premium is recorded as a liability in the Statement of Assets and
Liabilities and is subsequently adjusted to reflect the current fair value of the option written. Changes in the fair value of the written option are recorded as unrealized appreciation or depreciation until the
contract is exercised or has expired. The Fund will realize a gain or loss when the option contract is closed or expires. When option contracts are exercised, the proceeds on sales for a written call or purchased put
option contract, or the purchase cost for a written put or purchased call option contract, is adjusted by the amount of premium received or paid.
For over-the-counter options
purchased, the Fund bears the risk of loss of the amount of the premiums paid plus the positive change in market values net of any collateral held by the Fund should the counterparty fail to perform under the
contracts. Option contracts written by the Fund do not typically give rise to significant counterparty credit risk, as options written generally obligate the Fund and not the counterparty to perform. The risk in
writing a call option contract is that the Fund gives up the opportunity for profit if the market price of the security increases above the strike price and the option contract is exercised. The risk in writing a put
option contract is that the Fund may incur a loss if the market price of the security decreases below the strike price and the option contract is exercised. Exercise of a written option could result in the Fund
purchasing or selling a security or foreign currency when it otherwise would not, or at a price different from the current market value. In purchasing and writing options, the Fund bears the risk of an unfavorable
change in the value of the underlying instrument or the risk that the Fund may not be able to enter into a closing transaction due to an illiquid market.
Swap contracts
Swap contracts are negotiated in
the over-the-counter market and may be entered into as a bilateral contract or centrally cleared (centrally cleared swap contract). In a centrally cleared swap contract, immediately following execution of the swap
contract with a broker, the swap contract is novated to a central counterparty (the CCP) and the CCP becomes the Fund’s counterparty to the centrally cleared swap contract. The Fund is required to deposit
initial margin with the futures commission merchant (FCM), which pledges it through to the CCP in the form of cash or securities in an amount that varies depending on the size and risk profile of the particular swap
contract. Securities deposited as initial margin are designated in the Portfolio of Investments and cash deposited is recorded in the Statement of Assets and Liabilities as margin deposits. Unlike a bilateral swap
contract, for centrally cleared swap contracts, the Fund has minimal credit exposure to the FCM because the CCP stands between the Fund and the relevant buyer/seller on the other side of the contract. Swap contracts
are marked-to-market daily and changes in value are recorded as unrealized appreciation (depreciation). The daily change in valuation of centrally cleared swap contracts, if any, is recorded as a receivable or payable
for variation margin in the Statement of Assets and Liabilities.
Entering into these contracts
involves, to varying degrees, elements of interest, liquidity and counterparty credit risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that there
may be unfavorable changes in interest rates, market conditions or other conditions, that it may be difficult to initiate a swap transaction or liquidate a position at an advantageous time or price which may result in
significant losses, and that the FCM or CCP may not fulfill its obligation under the contract.
Credit default swap contracts
The Fund entered into credit
default swap contracts to increase or decrease its credit exposure to an index and to manage credit risk exposure. These instruments may be used for other purposes in future periods. Credit default swap contracts are
agreements in which one party pays fixed periodic payments to a counterparty in consideration for an agreement from the counterparty to make a specific payment should a specified credit event(s) take place. Although
specified credit events are contract specific, credit events are generally defined as bankruptcy, failure to pay, restructuring, obligation acceleration, obligation default, or repudiation/moratorium.
| Variable Portfolio – Managed Risk U.S. Fund | Semiannual Report 2020 | 19 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
As the purchaser of a credit
default swap contract, the Fund purchases protection by paying a periodic interest rate on the notional amount to the counterparty. The interest amount is accrued daily as a component of unrealized appreciation
(depreciation) and is recorded as a realized loss upon payment. If a credit event as specified in the contract occurs, the Fund may have the option either to deliver the reference obligation to the seller in exchange
for a cash payment of its par amount, or to receive a net cash settlement equal to the par amount less an agreed-upon value of the reference obligation as of the date of the credit event. The difference between the
value of the obligation or cash delivered and the notional amount received will be recorded as a realized gain (loss).
As the seller of a credit default
swap contract, the Fund sells protection to a buyer and will generally receive a periodic interest rate on a notional amount. The interest amount is accrued daily as a component of unrealized appreciation
(depreciation) and is recorded as a realized gain upon receipt of the payment. If a credit event as specified in the contract with the counterparty occurs, the Fund may either be required to accept the reference
obligation from the buyer in exchange for a cash payment of its notional amount, or to pay the buyer a net cash settlement equal to the notional amount less an agreed-upon value of the reference obligation (recovery
value) as of the date of the credit event. The difference between the value of the obligation or cash received and the notional amount paid will be recorded as a realized gain (loss). The maximum potential amount of
undiscounted future payments the Fund could be required to make as the seller of protection under a credit default swap contract is equal to the notional amount of the reference obligation. These potential amounts may
be partially offset by any recovery values of the respective reference obligations or upfront receipts upon entering into the agreement. The notional amounts and market values of all credit default swap contracts in
which the Fund is the seller of protection, if any, are disclosed in the Credit Default Swap Contracts Outstanding schedule following the Portfolio of Investments.
As a protection seller, the Fund
bears the risk of loss from the credit events specified in the contract with the counterparty. For credit default swap contracts on credit indices, quoted market prices and resulting market values serve as an
indicator of the current status of the payment/performance risk. Increasing market values, in absolute terms when compared to the notional amount of the swap, represent a deterioration of the reference entity’s
credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the contract.
Any upfront payments or receipts by
the Fund upon entering into a credit default swap contract is recorded as an asset or liability, respectively, and amortized daily as a component of realized gain (loss) in the Statement of Operations. Credit default
swap contracts are valued daily, and the change in value is recorded as unrealized appreciation (depreciation) until the termination of the swap, at which time a realized gain (loss) is recorded.
Credit default swap contracts can
involve greater risks than if a fund had invested in the reference obligation directly since, in addition to general market risks, credit default swaps are subject to counterparty credit risk, leverage risk, hedging
risk, correlation risk and liquidity risk.
Effects of derivative transactions in
the financial statements
The following tables are intended
to provide additional information about the effect of derivatives on the financial statements of the Fund, including: the fair value of derivatives by risk category and the location of those fair values in the
Statement of Assets and Liabilities; and the impact of derivative transactions over the period in the Statement of Operations, including realized and unrealized gains (losses). The derivative instrument schedules
following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any.
| 20 | Variable Portfolio – Managed Risk U.S. Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
The following table is a summary of
the fair value of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) at June 30, 2020:
| Asset derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Credit risk | Component of trust capital — unrealized appreciation on swap contracts | 84,028* |
| Equity risk | Component of trust capital — unrealized appreciation on futures contracts | 330,059* |
| Equity risk | Investments, at value — Options Purchased | 2,853,400 |
| Interest rate risk | Component of trust capital — unrealized appreciation on futures contracts | 60,245* |
| Total | 3,327,732 |
| Liability derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Equity risk | Component of trust capital - unrealized depreciation on futures contracts | 938,337* |
| Interest rate risk | Component of trust capital - unrealized depreciation on futures contracts | 18,091* |
| Total | 956,428 |
| * | Includes cumulative appreciation (depreciation) as reported in the tables following the Portfolio of Investments. Only the current day’s variation margin is reported in receivables or payables in the Statement of Assets and Liabilities. |
The following table indicates the
effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) in the Statement of Operations for the six months ended June 30, 2020:
| Amount of realized gain (loss) on derivatives recognized in income | ||||
| Risk exposure category | Futures contracts ($) | Options contracts purchased ($) | Swap contracts ($) | Total ($) |
| Credit risk | — | — | 17,909 | 17,909 |
| Equity risk | (8,462,860) | 4,326,716 | — | (4,136,144) |
| Interest rate risk | 937,159 | — | — | 937,159 |
| Total | (7,525,701) | 4,326,716 | 17,909 | (3,181,076) |
| Change in unrealized appreciation (depreciation) on derivatives recognized in income | ||||
| Risk exposure category | Futures contracts ($) | Options contracts purchased ($) | Swap contracts ($) | Total ($) |
| Credit risk | — | — | 84,028 | 84,028 |
| Equity risk | (1,046,497) | 596,338 | — | (450,159) |
| Interest rate risk | 186,782 | — | — | 186,782 |
| Total | (859,715) | 596,338 | 84,028 | (179,349) |
The following table is a summary
of the average outstanding volume by derivative instrument for the six months ended June 30, 2020:
| Derivative instrument | Average notional amounts ($)* |
| Futures contracts — long | 47,803,628 |
| Futures contracts — short | 35,570,383 |
| Credit default swap contracts — sell protection | 5,500,000 |
| Variable Portfolio – Managed Risk U.S. Fund | Semiannual Report 2020 | 21 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
| Derivative instrument | Average value ($)* |
| Options contracts — purchased | 2,472,125 |
| * | Based on the ending quarterly outstanding amounts for the six months ended June 30, 2020. |
Asset- and mortgage-backed
securities
The Fund may invest in asset-backed
and mortgage-backed securities. The maturity dates shown represent the original maturity of the underlying obligation. Actual maturity may vary based upon prepayment activity on these obligations. All, or a portion,
of the obligation may be prepaid at any time because the underlying asset may be prepaid. As a result, decreasing market interest rates could result in an increased level of prepayment. An increased prepayment rate
will have the effect of shortening the maturity of the security. Unless otherwise noted, the coupon rates presented are fixed rates.
Delayed delivery securities
The Fund may trade securities on
other than normal settlement terms, including securities purchased or sold on a “when-issued” or "forward commitment" basis. This may increase risk to the Fund since the other party to the transaction may
fail to deliver, which could cause the Fund to subsequently invest at less advantageous prices. The Fund designates cash or liquid securities in an amount equal to the delayed delivery commitment.
To be announced securities
The Fund may trade securities on a
To Be Announced (TBA) basis. As with other delayed-delivery transactions, a seller agrees to issue a TBA security at a future date. However, the seller does not specify the particular securities to be delivered.
Instead, the Fund agrees to accept any security that meets specified terms.
In some cases, Master Securities
Forward Transaction Agreements (MSFTAs) may be used to govern transactions of certain forward-settling agency mortgage-backed securities, such as delayed-delivery and TBAs, between the Fund and counterparty. The MSFTA
maintains provisions for, among other things, initiation and confirmation, payment and transfer, events of default, termination, and maintenance of collateral relating to such transactions.
Mortgage dollar roll transactions
The Fund may enter into mortgage
“dollar rolls” in which the Fund sells securities for delivery in the current month and simultaneously contracts with the same counterparty to repurchase similar but not identical securities (same type,
coupon and maturity) on a specified future date. During the roll period, the Fund loses the right to receive principal and interest paid on the securities sold. However, the Fund will benefit because it receives
negotiated amounts in the form of reductions of the purchase price for the future purchase plus the interest earned on the cash proceeds of the securities sold until the settlement date of the forward purchase. The
Fund records the incremental difference between the forward purchase and sale of each forward roll as a realized gain or loss. Unless any realized gains exceed the income, capital appreciation, and gain or loss due to
mortgage prepayments that would have been realized on the securities sold as part of the mortgage dollar roll, the use of this technique will diminish the investment performance of the Fund compared to what the
performance would have been without the use of mortgage dollar rolls. All cash proceeds will be invested in instruments that are permissible investments for the Fund. The Fund identifies cash or liquid securities in
an amount equal to the forward purchase price.
For financial reporting and tax
purposes, the Fund treats “to be announced” mortgage dollar rolls as two separate transactions, one involving the purchase of a security and a separate transaction involving a sale. These transactions may
increase the Fund’s portfolio turnover rate. The Fund does not currently enter into mortgage dollar rolls that are accounted for as financing transactions.
Mortgage dollar rolls involve the
risk that the market value of the securities the Fund is obligated to repurchase may decline below the repurchase price, or that the counterparty may default on its obligations.
| 22 | Variable Portfolio – Managed Risk U.S. Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Offsetting of assets and
liabilities
The following table presents the
Fund’s gross and net amount of assets and liabilities available for offset under netting arrangements as well as any related collateral received or pledged by the Fund as of June 30, 2020:
| JPMorgan ($) | Morgan Stanley ($) | Total ($) | |
| Assets | |||
| Centrally cleared credit default swap contracts (a) | - | 15,302 | 15,302 |
| Options purchased puts | 2,853,400 | - | 2,853,400 |
| Total assets | 2,853,400 | 15,302 | 2,868,702 |
| Total financial and derivative net assets | 2,853,400 | 15,302 | 2,868,702 |
| Total collateral received (pledged) (b) | - | - | - |
| Net amount (c) | 2,853,400 | 15,302 | 2,868,702 |
| (a) | Centrally cleared swaps are included within payable/receivable for variation margin on the Statement of Assets and Liabilities. |
| (b) | In some instances, the actual collateral received and/or pledged may be more than the amount shown due to overcollateralization. |
| (c) | Represents the net amount due from/(to) counterparties in the event of default. |
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Interest income is recorded on an
accrual basis. Market premiums and discounts, including original issue discounts, are amortized and accreted, respectively, over the expected life of the security on all debt securities, unless otherwise noted. The
Fund classifies gains and losses realized on prepayments received on mortgage-backed securities as adjustments to interest income.
The Fund may place a debt security
on non-accrual status and reduce related interest income when it becomes probable that the interest will not be collected and the amount of uncollectible interest can be reasonably estimated. A defaulted debt security
is removed from non-accrual status when the issuer resumes interest payments or when collectibility of interest is reasonably assured.
Corporate actions and dividend
income are recorded on the ex-dividend date.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a
proportionate change in return of capital to shareholders.
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
Income and capital gain
distributions from the Underlying Funds, if any, are recorded on the ex-dividend date.
| Variable Portfolio – Managed Risk U.S. Fund | Semiannual Report 2020 | 23 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund is treated as a
partnership for federal income tax purposes, and the Fund does not expect to make regular distributions. The Fund will not be subject to federal income tax, and therefore, there is no provision for federal income
taxes. The partners of the Fund are subject to tax on their distributive share of the Fund’s income and loss. The components of the Fund’s net assets are reported at the partner-level for federal income
tax purposes, and therefore, are not presented in the Statement of Assets and Liabilities.
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees and
underlying fund fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager). Under the Management Agreement, the Investment Manager provides the Fund with investment research and advice, as well as
administrative and accounting services. The management services fee is an annual fee that is a blend of (i) 0.02% on assets invested in affiliated underlying funds (including exchange-traded funds and closed-end
funds) that pay a management services fee (or investment advisory services fee, as applicable) to the Investment Manager and (ii) a fee that declines from 0.72% to 0.52%, depending on asset levels, on assets
invested in securities (other than affiliated underlying funds (including exchange-traded funds and closed-end funds) that pay a management services fee (or investment advisory services fee, as applicable) to the
Investment Manager) including other funds advised by the Investment Manager that do not pay a management services fee to the Investment Manager, third party funds, derivatives and individual securities. The annualized
effective management services fee rate for the six months ended June 30, 2020 was 0.13% of the Fund’s average daily net assets.
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 expense and fee
levels and the Fund may own different proportions of Underlying Funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. These expenses are not reflected in the expenses
shown in Statement of Operations and are not included in the ratios to average net assets shown in the Financial Highlights.
| 24 | Variable Portfolio – Managed Risk U.S. Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. These members of the Board of Trustees
may participate in a Deferred Compensation Plan (the Deferred Plan) which may be terminated at any time. Obligations of the Deferred Plan will be paid solely out of the Fund’s assets, and all amounts payable
under the Deferred Plan constitute a general unsecured obligation of the Fund.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The annualized
effective service fee rate for the six months ended June 30, 2020, was 0.06% of the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. The Board of Trustees has approved, and the Fund has adopted, a distribution plan
(the Plan) which sets the distribution fees for the Fund. These fees are calculated daily and are intended to compensate the Distributor for selling shares of the Fund. The Fund pays a monthly distribution fee to the
Distributor at the maximum annual rate of 0.25% of the average daily net assets attributable to Class 2 shares of the Fund. The Fund pays no distribution and service fees for Class 1 shares.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, including indirect expenses of the Underlying Funds, after giving effect to fees waived/expenses reimbursed and any balance credits
and/or overdraft charges from the Fund’s custodian, do not exceed the following annual rate(s) as a percentage of the class’ average daily net assets:
| May 1, 2020 through April 30, 2021 | Prior to May 1, 2020 | |
| Class 1 | 0.80% | 0.85% |
| Class 2 | 1.05 | 1.10 |
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), transaction costs and brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program
fees and expenses, transaction charges and interest on borrowed money, interest, infrequent and/or unusual expenses and any other
| Variable Portfolio – Managed Risk U.S. Fund | Semiannual Report 2020 | 25 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
expenses the exclusion of which is specifically
approved by the Board of Trustees. This agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the
expense reimbursement arrangements described above are not recoverable by the Investment Manager or its affiliates in future periods.
Note 4. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $130,438,027 and $82,264,054, respectively, for the six months ended June 30, 2020, of which $92,774,554 and
$65,564,070, respectively, were U.S. government securities. The amount of purchase and sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 5. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes referred to
as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 6. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund did not borrow or lend
money under the Interfund Program during the six months ended June 30, 2020.
Note 7. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by Citibank, N.A., HSBC Bank USA, N.A. and JPMorgan Chase Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. The credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment Manager or an affiliated investment manager, severally and
not jointly, permits collective borrowings up to $1 billion. Interest is charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the
one-month LIBOR rate and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a
commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The commitment fee is included in other expenses in the Statement of Operations. This agreement
expires annually in December unless extended or renewed.
The Fund had no borrowings during
the six months ended June 30, 2020.
| 26 | Variable Portfolio – Managed Risk U.S. Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Note 8. Significant
risks
Derivatives risk
Losses involving derivative
instruments may be substantial, because a relatively small movement in the underlying reference (which is generally the price, rate or other economic indicator associated with a security(ies), commodity, currency or
index or other instrument or asset) may result in a substantial loss for the Fund. In addition to the potential for increased losses, the use of derivative instruments may lead to increased volatility within the Fund.
Derivatives will typically increase the Fund’s exposure to principal risks to which it is otherwise exposed, and may expose the Fund to additional risks, including correlation risk, counterparty risk, hedging
risk, leverage risk, liquidity risk and pricing risk.
Market and environment risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The Fund performance may also be
significantly negatively impacted by the economic impact of the coronavirus disease 2019 (COVID-19) pandemic. Public health crisis has become a pandemic that has resulted in, and may continue to result in, significant
global economic and societal disruption and market volatility due to disruptions in market access, resource availability, facilities operations, imposition of tariffs, export controls and supply chain disruption,
among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement and loss in human and other resources. The uncertainty surrounding the magnitude, duration,
reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as
the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and pandemics that may arise in the future – could negatively affect global economies and markets
in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in emerging market countries may be greater due to generally less established healthcare systems,
governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The disruptions caused
by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively impact the Fund’s ability to achieve their investment objectives. Any such event(s) could
have a significant adverse impact on the value and risk profile of the Fund.
The Investment Manager and its
affiliates have systematically implemented strategies to address the operating environment spurred by the COVID-19 pandemic. To promote the safety and security of our employees and to assure the continuity of our
business operations, we have implemented a work from home protocol for virtually all of our employee population, restricted business travel, and provided resources for complying with the guidance from the World Health
Organization, the U.S. Centers for Disease Control and governments. Our operations teams seek to operate without significant disruptions in service. Our pandemic strategy takes into consideration that a pandemic could
be widespread and may occur in multiple waves, affecting different communities at different times with varying levels of severity. We cannot, however, predict the impact that natural or man-made disasters, including
the COVID-19 pandemic, may have on the ability of our employees and third-party service providers to continue ordinary business operations and technology functions over near- or longer-term periods.
| Variable Portfolio – Managed Risk U.S. Fund | Semiannual Report 2020 | 27 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Shareholder concentration risk
At June 30, 2020, affiliated
shareholders of record owned 100.0% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 9. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 10. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial.
| 28 | Variable Portfolio – Managed Risk U.S. Fund | Semiannual Report 2020 |
Liquidity Risk
Management Program
Pursuant to Rule 22e-4 under the
1940 Act, the Fund has adopted a liquidity risk management program (Program). The Program’s principal objectives include assessing, managing and periodically reviewing the Fund’s liquidity risk. Liquidity
risk is defined as the risk that the Fund could not meet redemption requests without significant dilution of remaining investors’ interests in the Fund.
The Board has appointed the
Investment Manager as the program administrator for the Fund’s Program. The Investment Manager has delegated oversight of the Program to its Liquidity Risk Management Committee (the Committee). At a board
meeting during the fiscal period, the Committee provided the Board with a report addressing the operations of the program and assessing its adequacy and effectiveness of implementation for the period December 1, 2018,
through December 31, 2019, including:
| • | the Fund had sufficient liquidity to both meet redemptions and operate effectively on behalf of shareholders; |
| • | there were no material changes to the Program during the period; |
| • | the implementation of the Program was effective to manage the Fund’s liquidity risk; and |
| • | the Program operated adequately during the period. |
There can be no assurance that the
Program will achieve its objectives in the future. Please refer to the Fund’s prospectus for more information regarding the Fund’s exposure to liquidity risk and other principal risks to which an
investment in the Fund may be subject.
Board Consideration
and Approval of Management
Agreement
On June 17, 2020, the Board of
Trustees (the Board) and the Trustees who are not interested persons (as defined in the Investment Company Act of 1940) (the Independent Trustees) of Columbia Funds Variable Insurance Trust (the Trust) unanimously
approved the continuation of the Management Agreement (the Management Agreement) with Columbia Management Investment Advisers, LLC (the Investment Manager) with respect to Variable Portfolio – Managed Risk U.S.
Fund (the Fund), a series of the Trust. As detailed below, the Board’s Advisory Fees and Expenses Committee (the Committee) and the Board met on multiple occasions to review and discuss, among themselves, with
the management team of the Investment Manager and with an independent fee consultant, materials provided by the Investment Manager, the independent fee consultant and others before determining to approve the
continuation of the Management Agreement.
In connection with their
deliberations regarding the continuation of the Management Agreement, the Committee and the Board evaluated materials requested from the Investment Manager regarding the Fund and the Management Agreement, and
discussed these materials with representatives of the Investment Manager at Committee meetings held on March 10, 2020, April 30, 2020 and June 17, 2020 and at Board meetings held on March 11, 2020 and June 17, 2020.
In addition, the Board and its various committees consider matters bearing on the Management Agreement at other meetings throughout the year and in prior years and meet regularly with senior management of the Trust
and the Investment Manager. Through the Board’s Investment Oversight Committees, Trustees also meet with selected portfolio managers of the funds the Trustees oversee and with other investment personnel at
various times throughout the year. The Committee and the Board also consulted with the independent fee consultant, Fund counsel and the Independent Trustees’ independent legal counsel, who advised on various
matters with respect to the Committee’s and the Board’s considerations and otherwise assisted the Committee and the Board in their deliberations. On June 17, 2020, the Committee recommended that the Board
approve the continuation of the Management Agreement. On June 17, 2020, the Board, including the Independent Trustees, voting separately, unanimously approved the continuation of the Management Agreement for the
Fund.
| Variable Portfolio – Managed Risk U.S. Fund | Semiannual Report 2020 | 29 |
Board Consideration and Approval of
Management
Agreement (continued)
The Committee and the Board considered all
information that they, their legal counsel or the Investment Manager believed reasonably necessary to evaluate and to determine whether to recommend for approval or approve the continuation of the Management
Agreement. The information and factors considered by the Committee and the Board in recommending for approval or approving the continuation of the Management Agreement for the Fund included the following:
| • | Information on the investment performance of the Fund relative to the performance of a group of mutual funds determined to be comparable to the Fund by the Investment Manager, as well as performance relative to benchmarks; |
| • | Information on the Fund’s management fees and total expenses, including information comparing the Fund’s expenses to those of a group of comparable mutual funds, as determined by the Investment Manager; |
| • | The Investment Manager’s agreement to contractually limit or cap total operating expenses for the Fund through April 30, 2021 so that total operating expenses (excluding certain fees and expenses, such as transaction costs and certain other investment related expenses, interest, taxes, and infrequent and/or unusual expenses) would not exceed a specified annual rate, as a percentage of the Fund’s net assets; |
| • | The terms and conditions of the Management Agreement; |
| • | The current and proposed terms and conditions of other agreements and arrangements with affiliates of the Investment Manager relating to the operations of the Fund, including agreements with respect to the provision of distribution, transfer agency and shareholder services to the Fund; |
| • | Descriptions of various functions performed by the Investment Manager under the Management Agreement, including portfolio management and portfolio trading practices; |
| • | Information regarding any recently negotiated management fees of similarly-managed portfolios of other institutional clients of the Investment Manager; |
| • | Information regarding the reputation, regulatory history and resources of the Investment Manager, including information regarding senior management, portfolio managers and other personnel; |
| • | Information regarding the capabilities of the Investment Manager with respect to compliance monitoring services, including an assessment of the Investment Manager’s compliance system by the Fund’s Chief Compliance Officer; and |
| • | The profitability to the Investment Manager and its affiliates from their relationships with the Fund. |
Nature, extent and quality of
services provided under the Management Agreement
The Committee and the Board
considered the nature, extent and quality of services provided to the Fund by the Investment Manager and its affiliates under the Management Agreement and under separate agreements for the provision of transfer agency
and shareholder services, and the resources dedicated to the Fund and the other Columbia Funds by the Investment Manager and its affiliates. The Committee and the Board considered, among other things, the Investment
Manager’s ability to attract, motivate and retain highly qualified research, advisory and supervisory investment professionals (including compensation programs for personnel involved in fund management,
reputation and other attributes), the portfolio management services provided by those investment professionals, and the quality of the Investment Manager’s investment research capabilities and trade execution
services. The Committee and the Board also considered the potential benefits to shareholders of investing in a mutual fund that is part of a fund complex offering exposure to a variety of asset classes and investment
disciplines and providing a variety of fund and shareholder services.
The Committee and the Board also
considered the professional experience and qualifications of the senior personnel of the Investment Manager, which included consideration of the Investment Manager’s experience with funds using an investment
strategy similar to that used by the Investment Manager for the Fund. The Committee and the Board noted the compliance programs of and the compliance-related resources provided to the Fund by the Investment Manager
and its affiliates and the resources dedicated by the Investment Manager and its affiliates to risk management, and considered the Investment Manager’s ability to provide administrative services to the Fund and
coordinate the activities of the Fund’s other service
| 30 | Variable Portfolio – Managed Risk U.S. Fund | Semiannual Report 2020 |
Board Consideration and Approval of
Management
Agreement (continued)
providers. After reviewing these and related
factors, the Committee and the Board concluded, within the context of their overall conclusions, that the nature, extent and quality of the services provided to the Fund under the Management Agreement supported the
continuation of the Management Agreement.
Investment performance
The Committee and the Board
reviewed information about the performance of the Fund over various time periods, including performance information relative to benchmarks, information that compared the performance of the Fund to the performance of a
group of comparable mutual funds as determined by the Investment Manager, and information and analysis provided by the independent fee consultant. The Committee and the Board also reviewed a description of the
Investment Manager’s methodology for identifying the Fund’s peer groups for purposes of performance and expense comparisons.
The Committee and the Board noted
that, through December 31, 2019, the Fund’s performance was in the thirty-fourth percentile (where the best performance would be in the first percentile) of its category selected by the Investment Manager for
the purposes of performance comparisons for the one-year period.
The Committee and the Board also
considered the Investment Manager’s performance and reputation generally, the Investment Manager’s historical responsiveness to Board concerns about performance, and the Investment Manager’s
willingness to take steps intended to improve performance. After reviewing these and related factors, the Committee and the Board concluded, within the context of their overall conclusions, that the performance of the
Fund and the Investment Manager was sufficient, in light of other considerations, to support the continuation of the Management Agreement.
Investment management fee rates
and other expenses
The Committee and the Board
considered the management fees charged to the Fund under the Management Agreement as well as the total expenses incurred by the Fund. In assessing the reasonableness of the fees under the Management Agreement, the
Committee and the Board considered, among other information, the Fund’s total expense ratio as a percentage of average daily net assets. The Committee and the Board considered data provided by the Investment
Manager and the independent fee consultant. The Committee and the Board noted that, as of December 31, 2019, the Fund’s actual management fee and net total expense ratio were ranked in the first and third
quintiles, respectively, (where the lowest fees and expenses would be in the first quintile) against the Fund’s expense universe as determined by the Investment Manager for purposes of expense comparison. The
Committee and the Board also took into account the fee waiver and expense limitation arrangements agreed to by the Investment Manager, as noted above.
The Committee and the Board also
received and considered information about the management fees charged by the Investment Manager to institutional accounts. In considering the fees charged to those accounts, the Committee and the Board took into
account, among other things, the Investment Manager’s representations about the differences between managing mutual funds as compared to other types of accounts, including differences in the services provided,
differences in the risk profile of such business for the Investment Manager and the additional resources required to manage mutual funds effectively. The Committee and the Board also received and considered
information about the fees charged by the Investment Manager for sub-advisory services it provides to comparable unaffiliated funds. In evaluating the Fund’s management fees, the Committee and the Board also
took into account the demands, complexity and quality of the investment management of the Fund.
After reviewing these and related
factors, the Committee and the Board concluded, within the context of their overall conclusions, that the management fee rates and expenses of the Fund, in light of other considerations, supported the continuation of
the Management Agreement.
Costs of services provided and
profitability
The Committee and the Board also
took note of the costs the Investment Manager and its affiliates incur in connection with the services provided and the profitability to the Investment Manager and its affiliates from their relationships with the
Fund, and the efforts undertaken by the Investment Manager and its affiliates to manage efficiently their costs to provide such services.
| Variable Portfolio – Managed Risk U.S. Fund | Semiannual Report 2020 | 31 |
Board Consideration and Approval of
Management
Agreement (continued)
The Committee and the Board also considered the
compensation directly or indirectly received by the Investment Manager’s affiliates in connection with their relationships with the Fund. The Committee and the Board reviewed information provided by management
as to the profitability to the Investment Manager and its affiliates of their relationships with the Fund, information about the allocation of expenses used to calculate profitability, and comparisons of profitability
levels realized in 2019 to profitability levels realized in 2018. When reviewing profitability, the Committee and the Board also considered court cases in which adviser profitability was an issue in whole or in part,
the performance of similarly managed funds, the performance of the Fund, and the expense ratio of the Fund. In addition, the Committee and the Board considered information provided by the Investment Manager regarding
the Investment Manager’s financial condition and comparing its profitability to that of other asset management firms that are, or are subsidiaries of, publicly traded companies. In this regard, the Committee and
the Board also considered data provided by the independent fee consultant.
After reviewing these and related
factors, the Committee and the Board concluded, within the context of their overall conclusions, that the costs of services provided and the profitability to the Investment Manager and its affiliates from their
relationships with the Fund supported the continuation of the Management Agreement.
Economies of scale
The Committee and the Board
considered the potential existence of economies of scale in the provision by the Investment Manager of services to the Fund, to groups of related funds, and to the Investment Manager’s investment advisory
clients as a whole, and whether those economies of scale were shared with the Fund through breakpoints in investment management fees or other means, such as expense limitation arrangements and additional investments
by the Investment Manager in investment, trading, compliance and other resources. The Committee and the Board noted that the management fee schedules for the Fund contained breakpoints that would reduce the fee rate
on assets above specified threshold levels.
In considering these matters, the
Committee and the Board also considered the costs of the services provided and the profitability to the Investment Manager and its affiliates from their relationships with the Fund, as noted above. After reviewing
these and related factors, the Committee and the Board concluded, within the context of their overall conclusions, that the extent to which any economies of scale were expected to be shared with the Fund supported the
continuation of the Management Agreement.
Other benefits to the Investment
Manager
The Committee and the Board
received and considered information regarding “fall-out” or ancillary benefits received by the Investment Manager and its affiliates as a result of their relationships with the Fund, such as the engagement
of the Investment Manager’s affiliates to provide distribution, transfer agency and shareholder services to the Fund. In this regard, among other matters, the Committee and the Board considered that the
Fund’s distributor retains a portion of the distribution fees from the Fund. The Committee and the Board also considered the benefits of research made available to the Investment Manager by reason of brokerage
commissions generated by the Fund’s securities transactions, and reviewed information about the Investment Manager’s practices with respect to considering brokerage and research services when allocating
portfolio transactions. In this connection, the Board also noted that the amount of research made available to the Investment Manager by reason of brokerage commissions had been declining over time, and may decline
further. The Committee and the Board also considered the tax benefits provided to affiliates of the Investment Manager as a result of the election by certain Funds to be taxed as partnerships. The Committee and the
Board recognized that the Investment Manager’s profitability would be somewhat lower without these benefits.
Conclusion
The Committee and the Board
reviewed all of the above considerations in reaching their decisions to recommend or approve the continuation of the Management Agreement. In their deliberations, the Trustees did not identify any particular
information that was all-important or controlling, and individual Trustees may have attributed different weights to the various factors. Based on their evaluation of all factors that they deemed to be material,
including those factors described above, and assisted by the advice of independent legal counsel, the Board, including the Independent Trustees, voting separately, unanimously approved the continuation of the
Management Agreement.
| 32 | Variable Portfolio – Managed Risk U.S. Fund | Semiannual Report 2020 |
Results of Meeting of
Shareholders
At a Joint Special Meeting of
Shareholders held on April 16, 2020, shareholders of Columbia Funds Variable Insurance Trust elected each of the ten nominees for the trustees to the Board of Trustees of Columbia Funds Variable Insurance Trust, each
to hold office until he or she dies, resigns or is removed or, if sooner, until the next meeting of shareholders called for the purpose of electing trustees and until the election and qualification of his or her
successor, as follows:
| Trustee | Votes For | Votes Withheld | Abstentions |
| Janet L. Carrig | 26,231,108,809 | 1,129,334,152 | 0 |
| J. Kevin Connaughton | 26,249,644,638 | 1,110,798,323 | 0 |
| Olive Darragh | 26,323,990,658 | 1,036,452,304 | 0 |
| Douglas A. Hacker | 26,255,762,920 | 1,104,680,042 | 0 |
| Nancy T. Lukitsh | 26,332,381,722 | 1,028,061,240 | 0 |
| David M. Moffett | 26,252,719,395 | 1,107,723,567 | 0 |
| John J. Neuhauser | 26,222,694,456 | 1,137,748,505 | 0 |
| Christopher O. Petersen | 26,265,703,212 | 1,094,739,749 | 0 |
| Patrick J. Simpson | 26,222,908,024 | 1,137,534,938 | 0 |
| Natalie A. Trunow | 26,340,164,732 | 1,020,278,229 | 0 |
| Variable Portfolio – Managed Risk U.S. Fund | Semiannual Report 2020 | 33 |
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Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 225 Franklin Street, Boston, MA
02110-2804
© 2020 Columbia Management Investment
Advisers, LLC.
C-2033 AP (8/20)
Columbia Variable
Portfolio – Strategic Income Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
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| 5 | |
| 6 | |
| 33 | |
| 34 | |
| 35 | |
| 36 | |
| 38 | |
| 55 | |
| 55 | |
| 59 |
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which Columbia Variable Portfolio – Strategic Income Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov.
Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge
by visiting columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT, and for reporting periods ended prior to March 31, 2019, on Form N-Q. The Fund’s Form N-Q and Form N-PORT
filings are available on the SEC’s website at sec.gov. The Fund’s complete schedule of portfolio holdings, as filed on Form N-Q or Form N-PORT, can also be obtained without charge, upon request, by calling
800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
225 Franklin Street
Boston, MA 02110
Fund distributor
Columbia Management Investment Distributors,
Inc.
225 Franklin Street
Boston, MA 02110
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Columbia Variable Portfolio – Strategic
Income Fund | Semiannual Report 2020
Fund at a Glance
(Unaudited)
(Unaudited)
Investment objective
The Fund
seeks total return, consisting of current income and capital appreciation.
Portfolio management
Gene Tannuzzo, CFA
Co-Portfolio Manager
Managed Fund since 2010
Colin Lundgren, CFA
Co-Portfolio Manager
Managed Fund since 2010
Jason Callan
Co-Portfolio Manager
Managed Fund since 2017
| Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 | 3 |
Fund at a Glance (continued)
(Unaudited)
(Unaudited)
| 4 | Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount 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 $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
| January 1, 2020 — June 30, 2020 | |||||||
| Account value at the beginning of the period ($) | Account value at the end of the period ($) | Expenses paid during the period ($) | Fund’s annualized expense ratio (%) | ||||
| Actual | Hypothetical | Actual | Hypothetical | Actual | Hypothetical | Actual | |
| Class 1 | 1,000.00 | 1,000.00 | 988.30 | 1,021.43 | 3.41 | 3.47 | 0.69 |
| Class 2 | 1,000.00 | 1,000.00 | 985.80 | 1,020.19 | 4.64 | 4.72 | 0.94 |
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 366.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
Had Columbia Management Investment
Advisers, LLC and/or certain of its affiliates not waived/reimbursed certain fees and expenses, account value at the end of the period would have been reduced.
| Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 | 5 |
Portfolio of Investments
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 6 | Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 | 7 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 8 | Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 | 9 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 10 | Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 | 11 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 12 | Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 | 13 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 14 | Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 | 15 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 16 | Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 | 17 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 18 | Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 | 19 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 20 | Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 | 21 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 22 | Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 | 23 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 24 | Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 | 25 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 26 | Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
At June 30, 2020,
securities and/or cash totaling $3,520,065 were pledged as collateral.
Investments in
derivatives
| Forward foreign currency exchange contracts | |||||
| Currency to be sold | Currency to be purchased | Counterparty | Settlement date | Unrealized appreciation ($) | Unrealized depreciation ($) |
| 15,538,852 MXN | 683,178 USD | Morgan Stanley | 07/27/2020 | 9,534 | — |
| 1,513,077 EUR | 1,694,484 USD | UBS | 07/27/2020 | — | (6,441) |
| Total | 9,534 | (6,441) | |||
| Long futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| Euro-BTP | 17 | 09/2020 | EUR | 2,445,960 | 79,839 | — |
| Euro-OAT | 11 | 09/2020 | EUR | 1,844,150 | 32,391 | — |
| Long Gilt | 67 | 09/2020 | GBP | 9,221,880 | 49,593 | — |
| U.S. Treasury 10-Year Note | 44 | 09/2020 | USD | 6,123,563 | 339 | — |
| Total | 162,162 | — | ||||
| Short futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| Euro-Bund | (55) | 09/2020 | EUR | (9,708,600) | — | (81,698) |
| U.S. Treasury 5-Year Note | (116) | 09/2020 | USD | (14,586,094) | — | (32,058) |
| U.S. Ultra Treasury Bond | (14) | 09/2020 | USD | (3,054,188) | 11,368 | — |
| U.S. Ultra Treasury Bond | (8) | 09/2020 | USD | (1,745,250) | — | (38,943) |
| Total | 11,368 | (152,699) | ||||
| Put option contracts purchased | ||||||||
| Description | Counterparty | Trading currency | Notional amount | Number of contracts | Exercise price/Rate | Expiration date | Cost ($) | Value ($) |
| 10-Year OTC interest rate swap with Deutsche Bank to receive 3-Month USD LIBOR BBA and pay exercise rate | Morgan Stanley | USD | 16,700,000 | 16,700,000 | 1.00 | 12/29/2020 | 135,270 | 114,832 |
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 | 27 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
| Interest rate swap contracts | ||||||||||||
| Fund receives | Fund pays | Payment frequency | Counterparty | Maturity date | Notional currency | Notional amount | Value ($) | Periodic payments receivable (payable) ($) | Upfront payments ($) | Upfront receipts ($) | Unrealized appreciation ($) | Unrealized depreciation ($) |
| U.S. CPI Urban Consumers NSA | Fixed rate of 1.172% | Receives at Maturity, Pays at Maturity | Citi | 03/17/2030 | USD | 1,880,000 | 55,133 | — | — | — | 55,133 | — |
| U.S. CPI Urban Consumers NSA | Fixed rate of 1.185% | Receives at Maturity, Pays at Maturity | Citi | 04/22/2030 | USD | 1,800,000 | 50,542 | — | — | — | 50,542 | — |
| U.S. CPI Urban Consumers NSA | Fixed rate of 1.225% | Receives at Maturity, Pays at Maturity | Goldman Sachs International | 03/12/2030 | USD | 9,600,000 | 228,012 | — | — | — | 228,012 | — |
| U.S. CPI Urban Consumers NSA | Fixed rate of 1.761% | Receives at Maturity, Pays at Maturity | JPMorgan | 02/26/2030 | USD | 2,900,000 | (94,755) | — | — | — | — | (94,755) |
| U.S. CPI Urban Consumers NSA | Fixed rate of 1.611% | Receives at Maturity, Pays at Maturity | JPMorgan | 03/09/2030 | USD | 4,000,000 | (73,478) | — | — | — | — | (73,478) |
| Total | 165,454 | — | — | — | 333,687 | (168,233) | ||||||
| Cleared interest rate swap contracts | |||||||||||
| Fund receives | Fund pays | Payment frequency | Counterparty | Maturity date | Notional currency | Notional amount | Value ($) | Upfront payments ($) | Upfront receipts ($) | Unrealized appreciation ($) | Unrealized depreciation ($) |
| Fixed rate of 6.361% | 28-Day MXN TIIE-Banxico | Receives Monthly, Pays Monthly | Morgan Stanley | 10/24/2025 | MXN | 17,000,000 | 52,348 | — | — | 52,348 | — |
| Fixed rate of 5.985% | 28-Day MXN TIIE-Banxico | Receives Monthly, Pays Monthly | Morgan Stanley | 01/21/2026 | MXN | 8,000,000 | 18,072 | — | — | 18,072 | — |
| Fixed rate of 5.960% | 28-Day MXN TIIE-Banxico | Receives Monthly, Pays Monthly | Morgan Stanley | 02/02/2026 | MXN | 20,000,000 | 44,053 | — | — | 44,053 | — |
| 3-Month USD LIBOR | Fixed rate of 1.781% | Receives Quarterly, Pays SemiAnnually | Morgan Stanley | 08/09/2049 | USD | 2,100,000 | (494,461) | — | — | — | (494,461) |
| Total | (379,988) | — | — | 114,473 | (494,461) | ||||||
| Credit default swap contracts - buy protection | ||||||||||||
| Reference entity | Counterparty | Maturity date | Pay fixed rate (%) | Payment frequency | Notional currency | Notional amount | Value ($) | Periodic payments receivable (payable) ($) | Upfront payments ($) | Upfront receipts ($) | Unrealized appreciation ($) | Unrealized depreciation ($) |
| Markit CMBX North America Index, Series 11 BBB- | JPMorgan | 11/18/2054 | 3.000 | Monthly | USD | 200,000 | 40,908 | (100) | 7,329 | — | 33,479 | — |
| Credit default swap contracts - sell protection | |||||||||||||
| Reference entity | Counterparty | Maturity date | Receive fixed rate (%) | Payment frequency | Implied credit spread (%)* | Notional currency | Notional amount | Value ($) | Periodic payments receivable (payable) ($) | Upfront payments ($) | Upfront receipts ($) | Unrealized appreciation ($) | Unrealized depreciation ($) |
| Markit CMBX North America Index, Series 11 BBB- | Citi | 11/18/2054 | 3.000 | Monthly | 6.577 | USD | 400,000 | (81,816) | 200 | — | (111,441) | 29,825 | — |
| Markit CMBX North America Index, Series 12 AAA | Citi | 08/17/2061 | 0.500 | Monthly | 0.554 | USD | 810,000 | (3,420) | 67 | — | (50,429) | 47,076 | — |
| Markit CMBX North America Index, Series 10 BBB- | JPMorgan | 11/17/2059 | 3.000 | Monthly | 7.039 | USD | 800,000 | (163,408) | 400 | — | (158,106) | — | (4,902) |
| Markit CMBX North America Index, Series 10 BBB- | Morgan Stanley | 11/17/2059 | 3.000 | Monthly | 7.039 | USD | 500,000 | (102,130) | 250 | — | (104,400) | 2,520 | — |
| Total | (350,774) | 917 | — | (424,376) | 79,421 | (4,902) | |||||||
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 28 | Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
| * | Implied credit spreads, represented in absolute terms, utilized in determining the market value of credit default swap agreements on corporate or sovereign issues as of period end serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement. |
| Cleared credit default swap contracts - sell protection | ||||||||||||
| Reference entity | Counterparty | Maturity date | Receive fixed rate (%) | Payment frequency | Implied credit spread (%)* | Notional currency | Notional amount | Value ($) | Upfront payments ($) | Upfront receipts ($) | Unrealized appreciation ($) | Unrealized depreciation ($) |
| Markit CDX North America High Yield Index, Series 33 | Morgan Stanley | 12/20/2024 | 5.000 | Quarterly | 5.150 | USD | 5,554,960 | 347,717 | — | — | 347,717 | — |
| Markit CDX North America High Yield Index, Series 34 | Morgan Stanley | 06/20/2025 | 5.000 | Quarterly | 5.169 | USD | 9,215,000 | 565,154 | — | — | 565,154 | — |
| Total | 912,871 | — | — | 912,871 | — | |||||||
| * | Implied credit spreads, represented in absolute terms, utilized in determining the market value of credit default swap agreements on corporate or sovereign issues as of period end serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement. |
| Reference index and values for swap contracts as of period end | ||
| Reference index | Reference rate | |
| 28-Day MXN TIIE-Banxico | Interbank Equilibrium Interest Rate | 5.284% |
| 3-Month USD LIBOR | London Interbank Offered Rate | 0.344% |
| U.S. CPI Urban Consumers NSA | United States Consumer Price All Urban Non-Seasonally Adjusted Index | 0.646% |
Notes to Portfolio of
Investments
| (a) | Represents privately placed and other securities and instruments exempt from Securities and Exchange Commission registration (collectively, private placements), such as Section 4(a)(2) and Rule 144A eligible securities, which are often sold only to qualified institutional buyers. At June 30, 2020, the total value of these securities amounted to $119,761,115, which represents 58.75% of total net assets. |
| (b) | Variable rate security. The interest rate shown was the current rate as of June 30, 2020. |
| (c) | Represents fair value as determined in good faith under procedures approved by the Board of Trustees. At June 30, 2020, the total value of these securities amounted to $934,083, which represents 0.46% of total net assets. |
| (d) | Valuation based on significant unobservable inputs. |
| (e) | Variable or floating rate security, the interest rate of which adjusts periodically based on changes in current interest rates and prepayments on the underlying pool of assets. The interest rate shown was the current rate as of June 30, 2020. |
| (f) | Non-income producing investment. |
| (g) | Payment-in-kind security. Interest can be paid by issuing additional par of the security or in cash. |
| (h) | Represents a variable rate security with a step coupon where the rate adjusts according to a schedule for a series of periods, typically lower for an initial period and then increasing to a higher coupon rate thereafter. The interest rate shown was the current rate as of June 30, 2020. |
| (i) | Represents a security purchased on a when-issued basis. |
| (j) | Represents securities that have defaulted on payment of interest. The Fund has stopped accruing interest on these securities. At June 30, 2020, the total value of these securities amounted to $267,400, which represents 0.13% of total net assets. |
| (k) | Principal amounts are denominated in United States Dollars unless otherwise noted. |
| (l) | Principal and interest may not be guaranteed by a governmental entity. |
| (m) | Represents interest only securities which have the right to receive the monthly interest payments on an underlying pool of mortgage loans. |
| (n) | The stated interest rate represents the weighted average interest rate at June 30, 2020 of contracts within the senior loan facility. Interest rates on contracts are primarily determined either weekly, monthly or quarterly by reference to the indicated base lending rate and spread and the reset period. These base lending rates are primarily the LIBOR and other short-term rates. Base lending rates may be subject to a floor or minimum rate. The interest rate for senior loans purchased on a when-issued or delayed delivery basis will be determined upon settlement, therefore no interest rate is disclosed. Senior loans often require prepayments from excess cash flows or permit the borrowers to repay at their election. The degree to which borrowers repay, cannot be predicted with accuracy. As a result, remaining maturities of senior loans may be less than the stated maturities. Generally, the Fund is contractually obligated to receive approval from the agent bank and/or borrower prior to the disposition of a senior loan. |
| (o) | Represents a security purchased on a forward commitment basis. |
| (p) | The rate shown is the seven-day current annualized yield at June 30, 2020. |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 | 29 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Notes to Portfolio of Investments (continued)
| (q) | As defined in the Investment Company Act of 1940, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the period ended June 30, 2020 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Capital gain distributions($) | Realized gain (loss)($) | Dividends — affiliated issuers ($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.253% | |||||||||
| 12,682,033 | 49,691,922 | (52,036,321) | 2,720 | 10,340,354 | — | (404) | 46,019 | 10,340,354 | |
Abbreviation Legend
| CMO | Collateralized Mortgage Obligation |
| LIBOR | London Interbank Offered Rate |
| TBA | To Be Announced |
Currency Legend
| DOP | Dominican Republic Peso |
| EUR | Euro |
| GBP | British Pound |
| MXN | Mexican Peso |
| USD | US Dollar |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 30 | Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Fair value measurements (continued)
additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at June 30, 2020:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Asset-Backed Securities — Non-Agency | — | 18,852,050 | 736,380 | 19,588,430 |
| Commercial Mortgage-Backed Securities - Non-Agency | — | 11,675,999 | — | 11,675,999 |
| Common Stocks | ||||
| Energy | — | — | 860 | 860 |
| Financials | — | — | 0* | 0* |
| Utilities | — | — | 9,162 | 9,162 |
| Total Common Stocks | — | — | 10,022 | 10,022 |
| Corporate Bonds & Notes | — | 82,897,866 | — | 82,897,866 |
| Foreign Government Obligations | — | 18,201,580 | — | 18,201,580 |
| Residential Mortgage-Backed Securities - Agency | — | 23,898,528 | — | 23,898,528 |
| Residential Mortgage-Backed Securities - Non-Agency | — | 34,875,614 | 1,867,913 | 36,743,527 |
| Senior Loans | — | 12,700,679 | — | 12,700,679 |
| U.S. Treasury Obligations | 467,553 | — | — | 467,553 |
| Options Purchased Puts | — | 114,832 | — | 114,832 |
| Money Market Funds | 10,340,354 | — | — | 10,340,354 |
| Total Investments in Securities | 10,807,907 | 203,217,148 | 2,614,315 | 216,639,370 |
| Investments in Derivatives | ||||
| Asset | ||||
| Forward Foreign Currency Exchange Contracts | — | 9,534 | — | 9,534 |
| Futures Contracts | 173,530 | — | — | 173,530 |
| Swap Contracts | — | 1,473,931 | — | 1,473,931 |
| Liability | ||||
| Forward Foreign Currency Exchange Contracts | — | (6,441) | — | (6,441) |
| Futures Contracts | (152,699) | — | — | (152,699) |
| Swap Contracts | — | (667,596) | — | (667,596) |
| Total | 10,828,738 | 204,026,576 | 2,614,315 | 217,469,629 |
| * | Rounds to zero. |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The Fund’s assets assigned to
the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical
assets.
Forward foreign currency exchange
contracts, futures contracts and swap contracts are valued at unrealized appreciation (depreciation).
The following table is a
reconciliation of Level 3 assets for which significant observable and unobservable inputs were used to determine fair value:
| Balance as of 12/31/2019 ($) | Increase (decrease) in accrued discounts/ premiums ($) | Realized gain (loss) ($) | Change in unrealized appreciation (depreciation)(a) ($) | Purchases ($) | Sales ($) | Transfers into Level 3 ($) | Transfers out of Level 3 ($) | Balance as of 06/30/2020 ($) | |
| Asset-Backed Securities — Non-Agency | 1,581,662 | 6,942 | (669,480) | 482,687 | — | (665,431) | — | — | 736,380 |
| Common Stocks | — | — | — | (174,043) | — | — | 184,065 | — | 10,022 |
| Residential Mortgage-Backed Securities — Non-Agency | 495,158 | 6,904 | — | 24,462 | 1,365,805 | (24,416) | — | — | 1,867,913 |
| Total | 2,076,820 | 13,846 | (669,480) | 333,106 | 1,365,805 | (689,847) | 184,065 | — | 2,614,315 |
(a) Change in unrealized
appreciation (depreciation) relating to securities held at June 30, 2020 was $(183,192), which is comprised of Asset-Backed Securities - Non-Agency of $(33,611), Common Stocks of $(174,043) and Residential
Mortgage-Backed Securities - Non-Agency of $24,462.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 | 31 |
Portfolio of Investments (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Fair value measurements (continued)
The Fund’s assets assigned to the Level 3 category are valued utilizing the valuation technique deemed the most appropriate in the circumstances. Certain residential mortgage backed securities, asset backed securities and common stock classified as Level 3 securities are valued using the market approach and utilize single market quotations from broker dealers which may have included, but were not limited to, observable transactions for identical or similar assets in the market and the distressed nature of the security. The appropriateness of fair values for these securities is monitored on an ongoing basis which may include results of back testing, manual price reviews and other control procedures. Significant increases (decreases) to any of these inputs would have resulted in a significantly higher (lower) fair value measurement.
The Fund’s assets assigned to the Level 3 category are valued utilizing the valuation technique deemed the most appropriate in the circumstances. Certain residential mortgage backed securities, asset backed securities and common stock classified as Level 3 securities are valued using the market approach and utilize single market quotations from broker dealers which may have included, but were not limited to, observable transactions for identical or similar assets in the market and the distressed nature of the security. The appropriateness of fair values for these securities is monitored on an ongoing basis which may include results of back testing, manual price reviews and other control procedures. Significant increases (decreases) to any of these inputs would have resulted in a significantly higher (lower) fair value measurement.
Financial assets were transferred from
Level 2 to Level 3 due to utilizing a single market quotation from a broker dealer. As a result, management concluded that the market input(s) were generally unobservable.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 32 | Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 |
Statement of Assets and Liabilities
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $206,150,895) | $206,184,184 |
| Affiliated issuers (cost $10,337,707) | 10,340,354 |
| Options purchased (cost $135,270) | 114,832 |
| Cash | 37,352 |
| Foreign currency (cost $24,635) | 23,436 |
| Cash collateral held at broker for: | |
| Swap contracts | 240,000 |
| Margin deposits on: | |
| Futures contracts | 891,217 |
| Swap contracts | 2,388,848 |
| Unrealized appreciation on forward foreign currency exchange contracts | 9,534 |
| Unrealized appreciation on swap contracts | 446,587 |
| Upfront payments on swap contracts | 7,329 |
| Receivable for: | |
| Investments sold | 1,219,733 |
| Investments sold on a delayed delivery basis | 344,303 |
| Capital shares sold | 111,240 |
| Dividends | 2,289 |
| Interest | 1,604,308 |
| Foreign tax reclaims | 5,980 |
| Variation margin for futures contracts | 45,468 |
| Variation margin for swap contracts | 138,152 |
| Expense reimbursement due from Investment Manager | 243 |
| Trustees’ deferred compensation plan | 93,521 |
| Total assets | 224,248,910 |
| Liabilities | |
| Unrealized depreciation on forward foreign currency exchange contracts | 6,441 |
| Unrealized depreciation on swap contracts | 173,135 |
| Upfront receipts on swap contracts | 424,376 |
| Payable for: | |
| Investments purchased | 591,498 |
| Investments purchased on a delayed delivery basis | 18,816,073 |
| Capital shares purchased | 219,919 |
| Variation margin for futures contracts | 21,023 |
| Management services fees | 3,336 |
| Distribution and/or service fees | 649 |
| Service fees | 12,967 |
| Compensation of board members | 2,519 |
| Compensation of chief compliance officer | 18 |
| Other expenses | 34,905 |
| Trustees’ deferred compensation plan | 93,521 |
| Total liabilities | 20,400,380 |
| Net assets applicable to outstanding capital stock | $203,848,530 |
| Represented by | |
| Paid in capital | 197,122,592 |
| Total distributable earnings (loss) | 6,725,938 |
| Total - representing net assets applicable to outstanding capital stock | $203,848,530 |
| Class 1 | |
| Net assets | $108,891,935 |
| Shares outstanding | 25,818,465 |
| Net asset value per share | $4.22 |
| Class 2 | |
| Net assets | $94,956,595 |
| Shares outstanding | 22,782,729 |
| Net asset value per share | $4.17 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 | 33 |
Statement of Operations
Six Months Ended June 30, 2020 (Unaudited)
Six Months Ended June 30, 2020 (Unaudited)
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $89,043 |
| Dividends — affiliated issuers | 46,019 |
| Interest | 4,249,812 |
| Foreign taxes withheld | (5,897) |
| Total income | 4,378,977 |
| Expenses: | |
| Management services fees | 600,341 |
| Distribution and/or service fees | |
| Class 2 | 118,632 |
| Service fees | 61,567 |
| Compensation of board members | 8,054 |
| Custodian fees | 20,624 |
| Printing and postage fees | 10,462 |
| Audit fees | 25,301 |
| Legal fees | 2,548 |
| Interest on collateral | 909 |
| Compensation of chief compliance officer | 36 |
| Other | 5,642 |
| Total expenses | 854,116 |
| Fees waived or expenses reimbursed by Investment Manager and its affiliates | (44,680) |
| Total net expenses | 809,436 |
| Net investment income | 3,569,541 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | (182,576) |
| Investments — affiliated issuers | (404) |
| Foreign currency translations | 30,112 |
| Forward foreign currency exchange contracts | 117,523 |
| Futures contracts | (2,792,011) |
| Options purchased | 1,205,300 |
| Options contracts written | (1,160,266) |
| Swap contracts | 1,106,283 |
| Net realized loss | (1,676,039) |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | (6,287,458) |
| Investments — affiliated issuers | 2,720 |
| Foreign currency translations | 228 |
| Forward foreign currency exchange contracts | 41,444 |
| Futures contracts | (670,301) |
| Options purchased | (20,438) |
| Swap contracts | 1,597,258 |
| Foreign capital gains tax | 228 |
| Net change in unrealized appreciation (depreciation) | (5,336,319) |
| Net realized and unrealized loss | (7,012,358) |
| Net decrease in net assets resulting from operations | $(3,442,817) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 34 | Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 |
Statement of Changes in Net Assets
| Six Months Ended June 30, 2020 (Unaudited) | Year Ended December 31, 2019 | |
| Operations | ||
| Net investment income | $3,569,541 | $7,715,100 |
| Net realized loss | (1,676,039) | (2,033,813) |
| Net change in unrealized appreciation (depreciation) | (5,336,319) | 12,477,049 |
| Net increase (decrease) in net assets resulting from operations | (3,442,817) | 18,158,336 |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class 1 | — | (4,041,068) |
| Class 2 | — | (3,062,256) |
| Total distributions to shareholders | — | (7,103,324) |
| Increase (decrease) in net assets from capital stock activity | (5,179,366) | 33,123,976 |
| Total increase (decrease) in net assets | (8,622,183) | 44,178,988 |
| Net assets at beginning of period | 212,470,713 | 168,291,725 |
| Net assets at end of period | $203,848,530 | $212,470,713 |
| Six Months Ended | Year Ended | |||
| June 30, 2020 (Unaudited) | December 31, 2019 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 413,832 | 1,680,315 | 653,187 | 2,757,690 |
| Distributions reinvested | — | — | 966,763 | 4,041,068 |
| Redemptions | (271,844) | (1,111,167) | (760,175) | (3,203,096) |
| Net increase | 141,988 | 569,148 | 859,775 | 3,595,662 |
| Class 2 | ||||
| Subscriptions | 2,555,636 | 10,460,118 | 8,274,326 | 34,581,903 |
| Distributions reinvested | — | — | 739,675 | 3,062,256 |
| Redemptions | (4,085,928) | (16,208,632) | (1,933,639) | (8,115,845) |
| Net increase (decrease) | (1,530,292) | (5,748,514) | 7,080,362 | 29,528,314 |
| Total net increase (decrease) | (1,388,304) | (5,179,366) | 7,940,137 | 33,123,976 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 | 35 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income | Net realized and unrealized gain (loss) | Total from investment operations | Distributions from net investment income | Distributions from net realized gains | Total distributions to shareholders | |
| Class 1 | |||||||
| Six Months Ended 6/30/2020 (Unaudited) | $4.27 | 0.08 | (0.13) | (0.05) | — | — | — |
| Year Ended 12/31/2019 | $4.02 | 0.18 | 0.23 | 0.41 | (0.16) | — | (0.16) |
| Year Ended 12/31/2018 | $4.18 | 0.19 | (0.21) | (0.02) | (0.14) | — | (0.14) |
| Year Ended 12/31/2017 | $4.05 | 0.18 | 0.08 | 0.26 | (0.13) | — | (0.13) |
| Year Ended 12/31/2016 | $4.45 | 0.19 | 0.21 | 0.40 | (0.53) | (0.27) | (0.80) |
| Year Ended 12/31/2015 | $8.71 | 0.34 | (0.32)(e) | 0.02 | (3.20) | (1.08) | (4.28) |
| Class 2 | |||||||
| Six Months Ended 6/30/2020 (Unaudited) | $4.23 | 0.07 | (0.13) | (0.06) | — | — | — |
| Year Ended 12/31/2019 | $3.98 | 0.16 | 0.24 | 0.40 | (0.15) | — | (0.15) |
| Year Ended 12/31/2018 | $4.14 | 0.17 | (0.20) | (0.03) | (0.13) | — | (0.13) |
| Year Ended 12/31/2017 | $4.02 | 0.17 | 0.07 | 0.24 | (0.12) | — | (0.12) |
| Year Ended 12/31/2016 | $4.41 | 0.18 | 0.21 | 0.39 | (0.51) | (0.27) | (0.78) |
| Year Ended 12/31/2015 | $8.66 | 0.26 | (0.25)(e) | 0.01 | (3.18) | (1.08) | (4.26) |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Annualized. |
| (d) | Ratios include interest on collateral expense which is less than 0.01%. |
| (e) | Calculation of the net gain (loss) per share (both realized and unrealized) does not correlate to the aggregate realized and unrealized gain (loss) presented in the Statement of Operations due to the timing of subscriptions and redemptions of Fund shares in relation to fluctuations in the market value of the portfolio. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 36 | Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Six Months Ended 6/30/2020 (Unaudited) | $4.22 | (1.17%) | 0.74%(c),(d) | 0.69%(c),(d) | 3.69%(c) | 92% | $108,892 |
| Year Ended 12/31/2019 | $4.27 | 10.38% | 0.74%(d) | 0.69%(d) | 4.19% | 193% | $109,698 |
| Year Ended 12/31/2018 | $4.02 | (0.39%) | 0.77%(d) | 0.69%(d) | 4.49% | 157% | $99,738 |
| Year Ended 12/31/2017 | $4.18 | 6.36% | 0.77% | 0.71% | 4.42% | 162% | $99,806 |
| Year Ended 12/31/2016 | $4.05 | 9.15% | 0.73% | 0.66% | 4.50% | 179% | $95,971 |
| Year Ended 12/31/2015 | $4.45 | (1.77%) | 0.69% | 0.68% | 4.23% | 192% | $89,998 |
| Class 2 | |||||||
| Six Months Ended 6/30/2020 (Unaudited) | $4.17 | (1.42%) | 0.99%(c),(d) | 0.94%(c),(d) | 3.43%(c) | 92% | $94,957 |
| Year Ended 12/31/2019 | $4.23 | 10.22% | 0.99%(d) | 0.94%(d) | 3.92% | 193% | $102,773 |
| Year Ended 12/31/2018 | $3.98 | (0.64%) | 1.02%(d) | 0.94%(d) | 4.24% | 157% | $68,554 |
| Year Ended 12/31/2017 | $4.14 | 5.90% | 1.03% | 0.96% | 4.19% | 162% | $63,882 |
| Year Ended 12/31/2016 | $4.02 | 9.05% | 0.98% | 0.90% | 4.24% | 179% | $46,676 |
| Year Ended 12/31/2015 | $4.41 | (1.93%) | 0.98% | 0.94% | 4.23% | 192% | $35,854 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 | 37 |
Notes to Financial Statements
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Note 1. Organization
Columbia Variable Portfolio
– Strategic Income Fund (the Fund), a series of Columbia Funds Variable Insurance Trust (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940
Act), as an open-end management investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1 and Class 2 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued by
affiliated and unaffiliated life insurance companies (Participating Insurance Companies) as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors (Qualified
Investors) authorized by Columbia Management Investment Distributors, Inc. (the Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by participating in a Qualified Plan or by
buying a Contract and making allocations to the Fund. Although all share classes generally have identical voting, dividend and liquidation rights, each share class votes separately when required by the Trust’s
organizational documents or by law. Different share classes pay different net investment income distribution amounts to the extent the expenses of such share classes differ, and distributions in liquidation will be
proportional to the net asset value of each share class. Each share class has its own cost structure and other features.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on any
exchange are valued at the mean between the closing bid and asked prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Debt securities generally are
valued by pricing services approved by the Board of Trustees based upon market transactions for normal, institutional-size trading units of similar securities. The services may use various pricing techniques that take
into account, as applicable, factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data, as well as approved independent broker-dealer quotes. Debt securities for
which quotations are not readily available or not believed to be reflective of market value may also be valued based upon a bid quote from an approved independent broker-dealer. Debt securities maturing in 60 days or
less are valued primarily at amortized cost value, unless this method results in a valuation that management believes does not approximate market value.
Asset- and mortgage-backed
securities are generally valued by pricing services, which utilize pricing models that incorporate the securities’ cash flow and loan performance data. These models also take into account available market data,
including trades, market quotations, and benchmark yield curves for identical or similar securities. Factors used to identify similar securities may include, but are not limited to, issuer, collateral type, vintage,
prepayment speeds, collateral performance, credit ratings, credit enhancement and expected life. Asset-backed securities for which quotations are readily available may also be valued based upon an over-the-counter or
exchange bid quote from an approved independent broker-dealer.
Senior loan securities for which
reliable market quotations are readily available are generally valued by pricing services at the average of the bids received.
| 38 | Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Investments in open-end investment
companies (other than ETFs), are valued at the latest net asset value reported by those companies as of the valuation time.
Forward foreign currency exchange
contracts are marked-to-market based upon foreign currency exchange rates provided by a pricing service.
Futures and options on futures
contracts are valued based upon the settlement price at the close of regular trading on their principal exchanges or, in the absence of transactions, at the mean of the latest quoted bid and ask prices.
Option contracts are valued at the
mean of the latest quoted bid and ask prices on their primary exchanges. Option contracts, including over-the-counter option contracts, with no readily available market quotations are valued using mid-market
evaluations from independent third-party vendors.
Swap transactions are valued
through an independent pricing service or broker, or if neither is available, through an internal model based upon observable inputs.
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Foreign currency transactions and
translations
The values of all assets and
liabilities denominated in foreign currencies are generally translated into U.S. dollars at exchange rates determined at the close of regular trading on the New York Stock Exchange. Net realized and unrealized gains
(losses) on foreign currency transactions and translations include gains (losses) arising from the fluctuation in exchange rates between trade and settlement dates on securities transactions, gains (losses) arising
from the disposition of foreign currency and currency gains (losses) between the accrual and payment dates on dividends, interest income and foreign withholding taxes.
For financial statement purposes,
the Fund does not distinguish that portion of gains (losses) on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations
are included with the net realized and unrealized gains (losses) on investments in the Statement of Operations.
Derivative instruments
The Fund invests in certain
derivative instruments, as detailed below, to meet its investment objectives. Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more securities,
currencies, commodities, indices, or other assets or instruments. Derivatives may be used to increase investment flexibility (including to maintain cash reserves while maintaining desired exposure to certain assets),
for risk management (hedging) purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain investment risks,
such as foreign currency exchange rate risk, interest rate risk and credit risk. Derivatives may involve various risks, including the potential inability of the counterparty to fulfill its obligations under the terms
of the contract, the potential for an illiquid secondary market (making it difficult for the Fund to sell or terminate, including at favorable prices) and the potential for market movements which may expose the Fund
to gains or losses in excess of the amount shown in the Statement of Assets and Liabilities. The notional amounts of derivative instruments, if applicable, are not recorded in the financial statements.
| Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 | 39 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
A derivative instrument may suffer
a marked-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform its
obligations under the contract. The Fund’s risk of loss from counterparty credit risk on over-the-counter derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by
the Fund and the amount of any variation margin held by the counterparty, plus any replacement costs or related amounts. With exchange-traded or centrally cleared derivatives, there is reduced counterparty credit risk
to the Fund since the clearinghouse or central counterparty (CCP) provides some protection in the case of clearing member default. The clearinghouse or CCP stands between the buyer and the seller of the contract;
therefore, additional counterparty credit risk is failure of the clearinghouse or CCP. However, credit risk still exists in exchange-traded or centrally cleared derivatives with respect to initial and variation margin
that is held in a broker’s customer account. While brokers are required to segregate customer margin from their own assets, in the event that a broker becomes insolvent or goes into bankruptcy and at that time
there is a shortfall in the aggregate amount of margin held by the broker for all its clients, U.S. bankruptcy laws will typically allocate that shortfall on a pro-rata basis across all the broker’s customers
(including the Fund), potentially resulting in losses to the Fund.
In order to better define its
contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement)
or similar agreement with its derivatives contract counterparties. An ISDA Master Agreement is an agreement between the Fund and a counterparty that governs over-the-counter derivatives and typically contains, among
other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset with the counterparty
certain derivative instrument’s payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment
in the event of default (close-out netting), including the bankruptcy or insolvency of the counterparty. Note, however, that bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or
prohibitions against the right of offset or netting in bankruptcy, insolvency or other events.
Collateral (margin) requirements
differ by type of derivative. Margin requirements are established by the clearinghouse or CCP for exchange-traded and centrally cleared derivatives. Brokers can ask for margin in excess of the minimum in certain
circumstances. Collateral terms are contract specific for over-the-counter derivatives. For over-the-counter derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by
netting the marked-to-market amount for each transaction under such agreement and comparing that amount to the value of any variation margin currently pledged by the Fund and/or the counterparty. Generally, the amount
of collateral due from or to a party has to exceed a minimum transfer amount threshold (e.g., $250,000) before a transfer has to be made. To the extent amounts due to the Fund from its counterparties are not fully
collateralized, contractually or otherwise, the Fund bears the risk of loss from counterparty nonperformance. The Fund may also pay interest expense on cash collateral received from the broker. Any interest expense
paid by the Fund is shown on the Statement of Operations. The Fund attempts to mitigate counterparty risk by only entering into agreements with counterparties that it believes have the financial resources to honor
their obligations and by monitoring the financial stability of those counterparties.
Certain ISDA Master Agreements
allow counterparties of over-the-counter derivatives transactions to terminate derivatives contracts prior to maturity in the event the Fund’s net asset value declines by a stated percentage over a specified
time period or if the Fund fails to meet certain terms of the ISDA Master Agreement, which would cause the Fund to accelerate payment of any net liability owed to the counterparty. The Fund also has termination rights
if the counterparty fails to meet certain terms of the ISDA Master Agreement. In determining whether to exercise such termination rights, the Fund would consider, in addition to counterparty credit risk, whether
termination would result in a net liability owed from the counterparty.
For financial reporting purposes,
the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statement of Assets and Liabilities.
Forward foreign currency exchange
contracts
Forward foreign currency exchange
contracts are over-the-counter agreements between two parties to buy and sell a currency at a set price on a future date. The Fund utilized forward foreign currency exchange contracts to hedge the currency exposure
associated with some or all of the Fund’s securities. These instruments may be used for other purposes in future periods.
| 40 | Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
The values of forward foreign
currency exchange contracts fluctuate daily with changes in foreign currency exchange rates. Changes in the value of these contracts are recorded as unrealized appreciation or depreciation until the contract is
exercised or has expired. The Fund will realize a gain or loss when the forward foreign currency exchange contract is closed or expires. Non-deliverable forward foreign currency exchange contracts are settled with the
counterparty in U.S. dollars without delivery of foreign currency.
The use of forward foreign currency
exchange contracts does not eliminate fluctuations in the prices of the Fund’s portfolio securities. The risks of forward foreign currency exchange contracts include movement in the values of the foreign
currencies relative to the U.S. dollar (or other foreign currencies) and the possibility that counterparties will not complete their contractual obligations, which may be in excess of the amount reflected, if any, in
the Statement of Assets and Liabilities.
Futures contracts
Futures contracts are
exchange-traded and represent commitments for the future purchase or sale of an asset at a specified price on a specified date. The Fund bought and sold futures contracts to manage the duration and yield curve
exposure of the Fund versus the benchmark. These instruments may be used for other purposes in future periods. Upon entering into futures contracts, the Fund bears risks that it may not achieve the anticipated
benefits of the futures contracts and may realize a loss. Additional risks include counterparty credit risk, the possibility of an illiquid market, and that a change in the value of the contract or option may not
correlate with changes in the value of the underlying asset.
Upon entering into a futures
contract, the Fund deposits cash or securities with the broker, known as a futures commission merchant (FCM), in an amount sufficient to meet the initial margin requirement. The initial margin deposit must be
maintained at an established level over the life of the contract. Cash deposited as initial margin is recorded in the Statement of Assets and Liabilities as margin deposits. Securities deposited as initial margin are
designated in the Portfolio of Investments. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily change in the contract value and are
recorded as variation margin receivable or payable and are offset in unrealized gains or losses. The Fund recognizes a realized gain or loss when the contract is closed or expires. Futures contracts involve, to
varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities.
Options contracts
Options are contracts which entitle
the holder to purchase or sell securities or other identified assets at a specified price, or in the case of index option contracts, to receive or pay the difference between the index value and the strike price of the
index option contract. Option contracts can be either exchange-traded or over-the-counter. The Fund purchased option contracts to manage exposure to fluctuations in interest rates. These instruments may be used for
other purposes in future periods. Completion of transactions for option contracts traded in the over-the-counter market depends upon the performance of the other party. Cash collateral may be collected or posted by
the Fund to secure certain over-the-counter option contract trades. Cash collateral held or posted by the Fund for such option contract trades must be returned to the broker or the Fund upon closure, exercise or
expiration of the contract.
Options contracts purchased are
recorded as investments. When the Fund writes an options contract, the premium received is recorded as an asset and an amount equivalent to the premium is recorded as a liability in the Statement of Assets and
Liabilities and is subsequently adjusted to reflect the current fair value of the option written. Changes in the fair value of the written option are recorded as unrealized appreciation or depreciation until the
contract is exercised or has expired. The Fund will realize a gain or loss when the option contract is closed or expires. When option contracts are exercised, the proceeds on sales for a written call or purchased put
option contract, or the purchase cost for a written put or purchased call option contract, is adjusted by the amount of premium received or paid.
For over-the-counter options
purchased, the Fund bears the risk of loss of the amount of the premiums paid plus the positive change in market values net of any collateral held by the Fund should the counterparty fail to perform under the
contracts. Option contracts written by the Fund do not typically give rise to significant counterparty credit risk, as options written generally obligate the Fund and not the counterparty to perform. The risk in
writing a call option contract is that the Fund gives up the opportunity for profit if the market price of the security increases above the strike price and the option contract is exercised. The risk in writing a put
option contract is that the Fund may incur a loss if the market price of the security
| Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 | 41 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
decreases below the strike price and the option
contract is exercised. Exercise of a written option could result in the Fund purchasing or selling a security or foreign currency when it otherwise would not, or at a price different from the current market value. In
purchasing and writing options, the Fund bears the risk of an unfavorable change in the value of the underlying instrument or the risk that the Fund may not be able to enter into a closing transaction due to an
illiquid market.
Interest rate swaption contracts
Interest rate swaption contracts
entered into by the Fund typically represent an option that gives the purchaser the right, but not the obligation, to enter into an interest rate swap contract on a future date. Each interest rate swaption agreement
will specify if the buyer is entitled to receive the fixed or floating rate if the interest rate is exercised. Changes in the value of a purchased interest rate swaption contracts are reported as unrealized
appreciation or depreciation on options in the Statement of Assets and Liabilities. Gain or loss is recognized in the Statement of Operations when the interest rate swaption contract is closed or expires.
When the Fund writes an interest
rate swaption contract, the premium received is recorded as an asset and an amount equivalent to the premium is recorded as a liability in the Statement of Assets and Liabilities and is subsequently adjusted to
reflect the current fair value of the interest rate swaption contract written. Premiums received from writing interest rate swaption contracts that expire unexercised are recorded by the Fund on the expiration date as
realized gains from options written in the Statement of Operations. The difference between the premium and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also recorded
as realized gain, or if the premium is less than the amount paid for the closing purchase, as realized loss. These amounts are reflected as net realized gain (loss) on options written in the Statement of
Operations.
Swap contracts
Swap contracts are negotiated in
the over-the-counter market and may be entered into as a bilateral contract or centrally cleared (centrally cleared swap contract). In a centrally cleared swap contract, immediately following execution of the swap
contract with a broker, the swap contract is novated to a central counterparty (the CCP) and the CCP becomes the Fund’s counterparty to the centrally cleared swap contract. The Fund is required to deposit
initial margin with the futures commission merchant (FCM), which pledges it through to the CCP in the form of cash or securities in an amount that varies depending on the size and risk profile of the particular swap
contract. Securities deposited as initial margin are designated in the Portfolio of Investments and cash deposited is recorded in the Statement of Assets and Liabilities as margin deposits. Unlike a bilateral swap
contract, for centrally cleared swap contracts, the Fund has minimal credit exposure to the FCM because the CCP stands between the Fund and the relevant buyer/seller on the other side of the contract. Swap contracts
are marked-to-market daily and changes in value are recorded as unrealized appreciation (depreciation). The daily change in valuation of centrally cleared swap contracts, if any, is recorded as a receivable or payable
for variation margin in the Statement of Assets and Liabilities.
Entering into these contracts
involves, to varying degrees, elements of interest, liquidity and counterparty credit risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that there
may be unfavorable changes in interest rates, market conditions or other conditions, that it may be difficult to initiate a swap transaction or liquidate a position at an advantageous time or price which may result in
significant losses, and that the FCM or CCP may not fulfill its obligation under the contract.
Credit default swap contracts
The Fund entered into credit
default swap contracts to increase or decrease its credit exposure to an index. These instruments may be used for other purposes in future periods. Credit default swap contracts are agreements in which one party pays
fixed periodic payments to a counterparty in consideration for an agreement from the counterparty to make a specific payment should a specified credit event(s) take place. Although specified credit events are contract
specific, credit events are generally defined as bankruptcy, failure to pay, restructuring, obligation acceleration, obligation default, or repudiation/moratorium.
As the purchaser of a credit
default swap contract, the Fund purchases protection by paying a periodic interest rate on the notional amount to the counterparty. The interest amount is accrued daily as a component of unrealized appreciation
(depreciation) and is recorded as a realized loss upon payment. If a credit event as specified in the contract occurs, the Fund
| 42 | Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
may have the option either to deliver the
reference obligation to the seller in exchange for a cash payment of its par amount, or to receive a net cash settlement equal to the par amount less an agreed-upon value of the reference obligation as of the date of
the credit event. The difference between the value of the obligation or cash delivered and the notional amount received will be recorded as a realized gain (loss).
As the seller of a credit default
swap contract, the Fund sells protection to a buyer and will generally receive a periodic interest rate on a notional amount. The interest amount is accrued daily as a component of unrealized appreciation
(depreciation) and is recorded as a realized gain upon receipt of the payment. If a credit event as specified in the contract with the counterparty occurs, the Fund may either be required to accept the reference
obligation from the buyer in exchange for a cash payment of its notional amount, or to pay the buyer a net cash settlement equal to the notional amount less an agreed-upon value of the reference obligation (recovery
value) as of the date of the credit event. The difference between the value of the obligation or cash received and the notional amount paid will be recorded as a realized gain (loss). The maximum potential amount of
undiscounted future payments the Fund could be required to make as the seller of protection under a credit default swap contract is equal to the notional amount of the reference obligation. These potential amounts may
be partially offset by any recovery values of the respective reference obligations or upfront receipts upon entering into the agreement. The notional amounts and market values of all credit default swap contracts in
which the Fund is the seller of protection, if any, are disclosed in the Credit Default Swap Contracts Outstanding schedule following the Portfolio of Investments.
As a protection seller, the Fund
bears the risk of loss from the credit events specified in the contract with the counterparty. For credit default swap contracts on credit indices, quoted market prices and resulting market values serve as an
indicator of the current status of the payment/performance risk. Increasing market values, in absolute terms when compared to the notional amount of the swap, represent a deterioration of the reference entity’s
credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the contract.
Any upfront payments or receipts by
the Fund upon entering into a credit default swap contract is recorded as an asset or liability, respectively, and amortized daily as a component of realized gain (loss) in the Statement of Operations. Credit default
swap contracts are valued daily, and the change in value is recorded as unrealized appreciation (depreciation) until the termination of the swap, at which time a realized gain (loss) is recorded.
Credit default swap contracts can
involve greater risks than if a fund had invested in the reference obligation directly since, in addition to general market risks, credit default swaps are subject to counterparty credit risk, leverage risk, hedging
risk, correlation risk and liquidity risk.
Interest rate swap contracts
The Fund entered into interest rate
swap transactions which may include inflation rate swap contracts to manage interest rate and market risk exposure to produce incremental earnings. These instruments may be used for other purposes in future periods.
An interest rate swap is an agreement between two parties where there are two flows and payments are made between the two counterparties and the payments are dependent upon changes in an interest rate, inflation rate
or inflation index calculated on a nominal amount. Interest rate swaps are agreements between two parties that involve the exchange of one type of interest rate for another type of interest rate cash flow on specified
dates in the future, based on a predetermined, specified notional amount. Certain interest rate swaps are considered forward-starting, whereby the accrual for the exchange of cash flows does not begin until a
specified date in the future. The net cash flow for a standard interest rate swap transaction is generally the difference between a floating market interest rate versus a fixed interest rate.
Interest rate swaps are valued
daily and unrealized appreciation (depreciation) is recorded. Certain interest rate swaps may accrue periodic interest on a daily basis as a component of unrealized appreciation (depreciation); the Fund will realize a
gain or loss upon the payment or receipt of accrued interest. The Fund will realize a gain or a loss when the interest rate swap is terminated.
| Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 | 43 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Effects of derivative transactions in
the financial statements
The following tables are intended
to provide additional information about the effect of derivatives on the financial statements of the Fund, including: the fair value of derivatives by risk category and the location of those fair values in the
Statement of Assets and Liabilities; and the impact of derivative transactions over the period in the Statement of Operations, including realized and unrealized gains (losses). The derivative instrument schedules
following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any.
The following table is a summary of
the fair value of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) at June 30, 2020:
| Asset derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Credit risk | Component of total distributable earnings (loss) — unrealized appreciation on swap contracts | 1,025,771* |
| Credit risk | Upfront payments on swap contracts | 7,329 |
| Foreign exchange risk | Unrealized appreciation on forward foreign currency exchange contracts | 9,534 |
| Interest rate risk | Component of total distributable earnings (loss) — unrealized appreciation on futures contracts | 173,530* |
| Interest rate risk | Investments, at value — Options purchased | 114,832 |
| Interest rate risk | Component of total distributable earnings (loss) — unrealized appreciation on swap contracts | 448,160* |
| Total | 1,779,156 |
| Liability derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Credit risk | Component of total distributable earnings (loss) — unrealized depreciation on swap contracts | 4,902* |
| Credit risk | Upfront receipts on swap contracts | 424,376 |
| Foreign exchange risk | Unrealized depreciation on forward foreign currency exchange contracts | 6,441 |
| Interest rate risk | Component of total distributable earnings (loss) — unrealized depreciation on futures contracts | 152,699* |
| Interest rate risk | Component of total distributable earnings (loss) — unrealized depreciation on swap contracts | 662,694* |
| Total | 1,251,112 |
| * | Includes cumulative appreciation (depreciation) as reported in the tables following the Portfolio of Investments. Only the current day’s variation margin is reported in receivables or payables in the Statement of Assets and Liabilities. |
The following table indicates the
effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) in the Statement of Operations for the six months ended June 30, 2020:
| Amount of realized gain (loss) on derivatives recognized in income | ||||||
| Risk exposure category | Forward foreign currency exchange contracts ($) | Futures contracts ($) | Options contracts written ($) | Options contracts purchased ($) | Swap contracts ($) | Total ($) |
| Credit risk | — | — | — | — | 1,116,597 | 1,116,597 |
| Foreign exchange risk | 117,523 | — | — | — | — | 117,523 |
| Interest rate risk | — | (2,792,011) | (1,160,266) | 1,205,300 | (10,314) | (2,757,291) |
| Total | 117,523 | (2,792,011) | (1,160,266) | 1,205,300 | 1,106,283 | (1,523,171) |
| 44 | Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
| Change in unrealized appreciation (depreciation) on derivatives recognized in income | |||||
| Risk exposure category | Forward foreign currency exchange contracts ($) | Futures contracts ($) | Options contracts purchased ($) | Swap contracts ($) | Total ($) |
| Credit risk | — | — | — | 1,887,917 | 1,887,917 |
| Foreign exchange risk | 41,444 | — | — | — | 41,444 |
| Interest rate risk | — | (670,301) | (20,438) | (290,659) | (981,398) |
| Total | 41,444 | (670,301) | (20,438) | 1,597,258 | 947,963 |
The following table is a summary
of the average outstanding volume by derivative instrument for the six months ended June 30, 2020:
| Derivative instrument | Average notional amounts ($)* |
| Futures contracts — long | 24,949,569 |
| Futures contracts — short | 22,780,734 |
| Credit default swap contracts — buy protection | 200,000 |
| Credit default swap contracts — sell protection | 17,157,700 |
| Derivative instrument | Average value ($)* |
| Options contracts — purchased | 729,856 |
| Options contracts — written | (630,591) |
| Derivative instrument | Average unrealized appreciation ($)* | Average unrealized depreciation ($)* |
| Forward foreign currency exchange contracts | 65,971 | (3,221) |
| Interest rate swap contracts | 224,080 | (877,721) |
| * | Based on the ending quarterly outstanding amounts for the six months ended June 30, 2020. |
Investments in senior loans
The Fund may invest in senior loan
participations and assignments of all or a portion of a loan. When the Fund purchases a senior loan participation, the Fund typically enters into a contractual relationship with the lender or third party selling such
participations (Selling Participant), but not the borrower, and assumes the credit risk of the borrower, Selling Participant and any other parties positioned between the Fund and the borrower. In addition, the Fund
may not directly benefit from the collateral supporting the senior loan that it has purchased from the Selling Participant. In contrast, when the Fund purchases an assignment of a senior loan, the Fund typically has
direct rights against the borrower; provided, however, that the Fund’s rights may be more limited than the lender from which it acquired the assignment and the Fund may be able to enforce its rights only through
an administrative agent. Although certain senior loan participations or assignments are secured by collateral, the Fund could experience delays or limitations in realizing such collateral or have its interest
subordinated to other indebtedness of the obligor. In the event that the administrator or collateral agent of a loan becomes insolvent or enters into receivership or bankruptcy, the Fund may incur costs and delays in
realizing payment or may suffer a loss of principal and/or interest. The risk of loss is greater for unsecured or subordinated loans. In addition, senior loan participations and assignments are vulnerable to market,
economic or other conditions or events that may reduce the demand for loan participations and assignments and certain loan participations and assignments which were liquid when purchased, may become illiquid.
The Fund may enter into senior loan
participations and assignments where all or a portion of the loan may be unfunded. The Fund is obligated to fund these commitments at the borrower’s discretion. These commitments, if any, are generally traded
and priced in the same manner as other senior loan securities and are disclosed as unfunded senior loan commitments in the Fund’s Portfolio of Investments with a corresponding payable for investments purchased.
The Fund designates cash or liquid securities to cover these commitments.
| Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 | 45 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Asset- and mortgage-backed
securities
The Fund may invest in asset-backed
and mortgage-backed securities. The maturity dates shown represent the original maturity of the underlying obligation. Actual maturity may vary based upon prepayment activity on these obligations. All, or a portion,
of the obligation may be prepaid at any time because the underlying asset may be prepaid. As a result, decreasing market interest rates could result in an increased level of prepayment. An increased prepayment rate
will have the effect of shortening the maturity of the security. Unless otherwise noted, the coupon rates presented are fixed rates.
Delayed delivery securities
The Fund may trade securities on
other than normal settlement terms, including securities purchased or sold on a “when-issued” or "forward commitment" basis. This may increase risk to the Fund since the other party to the transaction may
fail to deliver, which could cause the Fund to subsequently invest at less advantageous prices. The Fund designates cash or liquid securities in an amount equal to the delayed delivery commitment.
To be announced securities
The Fund may trade securities on a
To Be Announced (TBA) basis. As with other delayed-delivery transactions, a seller agrees to issue a TBA security at a future date. However, the seller does not specify the particular securities to be delivered.
Instead, the Fund agrees to accept any security that meets specified terms.
In some cases, Master Securities
Forward Transaction Agreements (MSFTAs) may be used to govern transactions of certain forward-settling agency mortgage-backed securities, such as delayed-delivery and TBAs, between the Fund and counterparty. The MSFTA
maintains provisions for, among other things, initiation and confirmation, payment and transfer, events of default, termination, and maintenance of collateral relating to such transactions.
Mortgage dollar roll transactions
The Fund may enter into mortgage
“dollar rolls” in which the Fund sells securities for delivery in the current month and simultaneously contracts with the same counterparty to repurchase similar but not identical securities (same type,
coupon and maturity) on a specified future date. During the roll period, the Fund loses the right to receive principal and interest paid on the securities sold. However, the Fund will benefit because it receives
negotiated amounts in the form of reductions of the purchase price for the future purchase plus the interest earned on the cash proceeds of the securities sold until the settlement date of the forward purchase. The
Fund records the incremental difference between the forward purchase and sale of each forward roll as a realized gain or loss. Unless any realized gains exceed the income, capital appreciation, and gain or loss due to
mortgage prepayments that would have been realized on the securities sold as part of the mortgage dollar roll, the use of this technique will diminish the investment performance of the Fund compared to what the
performance would have been without the use of mortgage dollar rolls. All cash proceeds will be invested in instruments that are permissible investments for the Fund. The Fund identifies cash or liquid securities in
an amount equal to the forward purchase price.
For financial reporting and tax
purposes, the Fund treats “to be announced” mortgage dollar rolls as two separate transactions, one involving the purchase of a security and a separate transaction involving a sale. These transactions may
increase the Fund’s portfolio turnover rate. The Fund does not currently enter into mortgage dollar rolls that are accounted for as financing transactions.
Mortgage dollar rolls involve the
risk that the market value of the securities the Fund is obligated to repurchase may decline below the repurchase price, or that the counterparty may default on its obligations.
Interest only and principal only
securities
The Fund may invest in Interest
Only (IO) or Principal Only (PO) securities. IOs are stripped securities entitled to receive all of the security’s interest, but none of its principal. IOs are particularly sensitive to changes in interest rates
and therefore subject to greater fluctuations in price than typical interest bearing debt securities. IOs are also subject to credit risk because the Fund may not receive all or part of the interest payments if the
issuer, obligor, guarantor or counterparty defaults on its obligation. Payments received for IOs are included in interest income on the Statement of Operations. Because no principal will be received at the maturity of
an IO, adjustments are made to the cost of the security on a monthly basis until maturity. These adjustments are included in interest income on the Statement of Operations. POs are stripped securities entitled to
| 46 | Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
receive the principal from the underlying
obligation, but not the interest. POs are particularly sensitive to changes in interest rates and therefore are subject to fluctuations in price. POs are also subject to credit risk because the Fund may not receive
all or part of its principal if the issuer, obligor, guarantor or counterparty defaults on its obligation. The Fund may also invest in IO or PO stripped mortgage-backed securities. Payments received for POs are
treated as reductions to the cost and par value of the securities.
Offsetting of assets and
liabilities
The following table presents the
Fund’s gross and net amount of assets and liabilities available for offset under netting arrangements as well as any related collateral received or pledged by the Fund as of June 30, 2020:
| Citi ($) | Goldman Sachs International ($) | JPMorgan ($) | Morgan Stanley ($)(a) | Morgan Stanley ($)(a) | UBS ($) | Total ($) | |
| Assets | |||||||
| Centrally cleared credit default swap contracts (b) | - | - | - | - | 116,973 | - | 116,973 |
| Centrally cleared interest rate swap contracts (b) | - | - | - | - | 21,179 | - | 21,179 |
| Forward foreign currency exchange contracts | - | - | - | 9,534 | - | - | 9,534 |
| Options purchased puts | - | - | - | 114,832 | - | - | 114,832 |
| OTC credit default swap contracts (c) | - | - | 40,808 | - | - | - | 40,808 |
| OTC interest rate swap contracts (c) | 105,675 | 228,012 | - | - | - | - | 333,687 |
| Total assets | 105,675 | 228,012 | 40,808 | 124,366 | 138,152 | - | 637,013 |
| Liabilities | |||||||
| Forward foreign currency exchange contracts | - | - | - | - | - | 6,441 | 6,441 |
| OTC credit default swap contracts (c) | 84,969 | - | 163,008 | 101,880 | - | - | 349,857 |
| OTC interest rate swap contracts (c) | - | - | 168,233 | - | - | - | 168,233 |
| Total liabilities | 84,969 | - | 331,241 | 101,880 | - | 6,441 | 524,531 |
| Total financial and derivative net assets | 20,706 | 228,012 | (290,433) | 22,486 | 138,152 | (6,441) | 112,482 |
| Total collateral received (pledged) (d) | - | - | (240,000) | - | - | - | (240,000) |
| Net amount (e) | 20,706 | 228,012 | (50,433) | 22,486 | 138,152 | (6,441) | 352,482 |
| (a) | Exposure can only be netted across transactions governed under the same master agreement with the same legal entity. |
| (b) | Centrally cleared swaps are included within payable/receivable for variation margin on the Statement of Assets and Liabilities. |
| (c) | Over-the-Counter (OTC) swap contracts are presented at market value plus periodic payments receivable (payable), which is comprised of unrealized appreciation, unrealized depreciation, upfront payments and upfront receipts. |
| (d) | In some instances, the actual collateral received and/or pledged may be more than the amount shown due to overcollateralization. |
| (e) | Represents the net amount due from/(to) counterparties in the event of default. |
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
The trade date for senior loans
purchased in the primary market is the date on which the loan is allocated. The trade date for senior loans purchased in the secondary market is the date on which the transaction is entered into.
Income recognition
Interest income is recorded on an
accrual basis. Market premiums and discounts, including original issue discounts, are amortized and accreted, respectively, over the expected life of the security on all debt securities, unless otherwise noted. The
Fund classifies gains and losses realized on prepayments received on mortgage-backed securities as adjustments to interest income.
The Fund may place a debt security
on non-accrual status and reduce related interest income when it becomes probable that the interest will not be collected and the amount of uncollectible interest can be reasonably estimated. A defaulted debt security
is removed from non-accrual status when the issuer resumes interest payments or when collectibility of interest is reasonably assured.
| Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 | 47 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Corporate actions and dividend
income are recorded on the ex-dividend date.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a
proportionate change in return of capital to shareholders.
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
The value of additional securities
received as an income payment through a payment in kind, if any, is recorded as interest income and increases the cost basis of such securities.
The Fund may receive other income
from senior loans, including amendment fees, consent fees and commitment fees. These fees are recorded as income when received by the Fund. These amounts are included in Interest Income in the Statement of
Operations.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund intends to qualify each
year as a regulated investment company under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its investment company taxable income and net capital gain, if any, for its
tax year, and as such will not be subject to federal income taxes. In addition, because the Fund meets the exception under Internal Revenue Code Section 4982(f), the Fund expects not to be subject to federal excise
tax. Therefore, no federal income or excise tax provision is recorded.
Foreign taxes
The Fund may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable, based upon its current interpretation of tax rules
and regulations that exist in the markets in which it invests.
Realized gains in certain countries
may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The
amount, if any, is disclosed as a liability on the Statement of Assets and Liabilities.
| 48 | Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Distributions to subaccounts
Distributions to the subaccounts of
Contracts, Qualified Plans and Qualified Investors are recorded at the close of business on the record date and are payable on the first business day following the record date. Dividends from net investment income, if
any, are declared and distributed annually. Capital gain distributions, when available, will be made annually. However, an additional capital gain distribution may be made during the fiscal year in order to comply
with the Internal Revenue Code, as applicable to registered investment companies. Income distributions and capital gain distributions are determined in accordance with federal income tax regulations, which may differ
from GAAP. All dividends and distributions are reinvested in additional shares of the applicable share class of the Fund at the net asset value as of the ex-dividend date of the distribution.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Recent accounting pronouncement
Accounting Standards Update 2020-04
Reference Rate Reform
In March 2020, the Financial
Accounting Standards Board issued Accounting Standards Update (ASU) No. 2020-04 Reference Rate Reform – Facilitation of the Effects of Reference Rate Reform on Financial Statements. This standard provides
exceptions for applying GAAP to contract modifications, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The standard is elective and effective on March 12,
2020 through December 31, 2022. The Fund expects that the adoption of the guidance will not have a material impact on its financial statements.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The management services fee is an annual fee that is equal to a percentage of the
Fund’s daily net assets that declines from 0.600% to 0.393% as the Fund’s net assets increase. The annualized effective management services fee rate for the six months ended June 30, 2020 was 0.600% of the
Fund’s average daily net assets.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. These members of the Board of Trustees
may participate in a Deferred Compensation Plan (the Deferred Plan) which may be terminated at any time. Obligations of the Deferred Plan will be paid solely out of the Fund’s assets, and all amounts payable
under the Deferred Plan constitute a general unsecured obligation of the Fund.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
| Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 | 49 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The annualized
effective service fee rate for the six months ended June 30, 2020, was 0.06% of the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. The Board of Trustees has approved, and the Fund has adopted, a distribution plan
(the Plan) which sets the distribution fees for the Fund. These fees are calculated daily and are intended to compensate the Distributor for selling shares of the Fund. The Fund pays a monthly distribution fee to the
Distributor at the maximum annual rate of 0.25% of the average daily net assets attributable to Class 2 shares of the Fund. The Fund pays no distribution and service fees for Class 1 shares.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft charges from the Fund’s
custodian, do not exceed the following annual rate(s) as a percentage of the class’ average daily net assets:
| Fee rate(s) contractual through April 30, 2021 | |
| Class 1 | 0.69% |
| Class 2 | 0.94 |
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and
brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program fees and expenses, transaction charges and interest on borrowed
money, interest, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This agreement may be modified or amended only with approval from
the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements described above are not recoverable by the Investment Manager or
its affiliates in future periods.
Note 4. Federal tax
information
The timing and character of
income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP because of temporary or permanent book to tax differences.
| 50 | Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
At June 30, 2020, the approximate
cost of all investments for federal income tax purposes and the aggregate gross approximate unrealized appreciation and depreciation based on that cost was:
| Federal tax cost ($) | Gross unrealized appreciation ($) | Gross unrealized (depreciation) ($) | Net unrealized appreciation ($) |
| 216,631,000 | 9,618,000 | (8,772,000) | 846,000 |
Tax cost of investments and
unrealized appreciation/(depreciation) may also include timing differences that do not constitute adjustments to tax basis.
The following capital loss
carryforwards, determined at December 31, 2019, may be available to reduce future net realized gains on investments, if any, to the extent permitted by the Internal Revenue Code.
| No expiration short-term ($) | No expiration long-term ($) | Total ($) |
| (285,047) | (2,187,271) | (2,472,318) |
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Note 5. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $186,239,540 and $191,410,915, respectively, for the six months ended June 30, 2020, of which $114,764,226 and
$120,020,648, respectively, were U.S. government securities. The amount of purchase and sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 6. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes referred to
as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 7. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund did not borrow or lend
money under the Interfund Program during the six months ended June 30, 2020.
| Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 | 51 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
Note 8. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by Citibank, N.A., HSBC Bank USA, N.A. and JPMorgan Chase Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. The credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment Manager or an affiliated investment manager, severally and
not jointly, permits collective borrowings up to $1 billion. Interest is charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the
one-month LIBOR rate and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a
commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The commitment fee is included in other expenses in the Statement of Operations. This agreement
expires annually in December unless extended or renewed.
The Fund had no borrowings during
the six months ended June 30, 2020.
Note 9. Significant
risks
Credit risk
Credit risk is the risk that the
value of debt instruments in the Fund’s portfolio may decline because the issuer defaults or otherwise becomes unable or unwilling, or is perceived to be unable or unwilling, to honor its financial obligations,
such as making payments to the Fund when due. Credit rating agencies assign credit ratings to certain debt instruments to indicate their credit risk. Lower rated or unrated debt instruments held by the Fund may
present increased credit risk as compared to higher-rated debt instruments.
Derivatives risk
Losses involving derivative
instruments may be substantial, because a relatively small movement in the underlying reference (which is generally the price, rate or other economic indicator associated with a security(ies), commodity, currency or
index or other instrument or asset) may result in a substantial loss for the Fund. In addition to the potential for increased losses, the use of derivative instruments may lead to increased volatility within the Fund.
Derivatives will typically increase the Fund’s exposure to principal risks to which it is otherwise exposed, and may expose the Fund to additional risks, including correlation risk, counterparty risk, hedging
risk, leverage risk, liquidity risk and pricing risk.
High-yield investments risk
Securities and other debt
instruments held by the Fund that are rated below investment grade (commonly called "high-yield" or "junk" bonds) and unrated debt instruments of comparable quality expose the Fund to a greater risk of loss of
principal and income than a fund that invests solely or primarily in investment grade debt instruments. In addition, these investments have greater price fluctuations, are less liquid and are more likely to experience
a default than higher-rated debt instruments. High-yield debt instruments are considered to be predominantly speculative with respect to the issuer’s capacity to pay interest and repay principal.
Interest rate risk
Interest rate risk is the risk of
losses attributable to changes in interest rates. In general, if prevailing interest rates rise, the values of debt securities tend to fall, and if interest rates fall, the values of debt securities tend to rise.
Actions by governments and central banking authorities can result in increases in interest rates. Increasing interest rates may negatively affect the value of debt securities held by the Fund, resulting in a negative
impact on the Fund’s performance and net asset value per share. In general, the longer the maturity or duration of a debt security, the greater its sensitivity to changes in interest rates. The Fund is subject
to the risk that the income generated by its investments may not keep pace with inflation.
LIBOR replacement risk
The elimination of London
Inter-Bank Offered Rate (LIBOR), among other "inter-bank offered" reference rates, may adversely affect the interest rates on, and value of, certain Fund investments for which the value is tied to LIBOR. The U.K.
Financial Conduct Authority has announced that it intends to stop compelling or inducing banks to submit LIBOR rates after 2021.
| 52 | Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
However, it remains unclear if LIBOR will continue
to exist in its current, or a modified, form. Alternatives to LIBOR have been established or are in development in most major currencies including the Secured Overnight Financing Rate (SOFR) that is intended to
replace U.S. dollar LIBOR. Markets are slowly developing in response to these new reference rates. Questions remain around the liquidity impact of the change in rates, and how to appropriately adjust these rates at
the time of transition, which pose risks for the Fund. These risks are likely to persist until new reference rates and fallbacks for both legacy and new instruments and contracts are commercially accepted and market
practices become settled.
Liquidity risk
Liquidity risk is the risk
associated with a lack of marketability of investments which may make it difficult to sell the investment at a desirable time or price. Changing regulatory, market or other conditions or environments (for example, the
interest rate or credit environments) may adversely affect the liquidity of the Fund’s investments. The Fund may have to accept a lower selling price for the holding, sell other investments, or forego another,
more appealing investment opportunity. Generally, the less liquid the market at the time the Fund sells a portfolio investment, the greater the risk of loss or decline of value to the Fund. A less liquid market can
lead to an increase in Fund redemptions, which may negatively impact Fund performance and net asset value per share, including, for example, if the Fund is forced to sell securities in a down market.
Market and environment risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The Fund performance may also be
significantly negatively impacted by the economic impact of the coronavirus disease 2019 (COVID-19) pandemic. Public health crisis has become a pandemic that has resulted in, and may continue to result in, significant
global economic and societal disruption and market volatility due to disruptions in market access, resource availability, facilities operations, imposition of tariffs, export controls and supply chain disruption,
among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement and loss in human and other resources. The uncertainty surrounding the magnitude, duration,
reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as
the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and pandemics that may arise in the future – could negatively affect global economies and markets
in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in emerging market countries may be greater due to generally less established healthcare systems,
governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The disruptions caused
by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively impact the Fund’s ability to achieve their investment objectives. Any such event(s) could
have a significant adverse impact on the value and risk profile of the Fund.
The Investment Manager and its
affiliates have systematically implemented strategies to address the operating environment spurred by the COVID-19 pandemic. To promote the safety and security of our employees and to assure the continuity of our
business operations, we have implemented a work from home protocol for virtually all of our employee population, restricted business travel, and provided resources for complying with the guidance from the World Health
Organization, the U.S. Centers for Disease Control and governments. Our operations teams seek to operate without significant disruptions in service. Our pandemic strategy takes into consideration that a pandemic could
be widespread and may occur in multiple waves, affecting
| Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 | 53 |
Notes to Financial Statements (continued)
June 30, 2020 (Unaudited)
June 30, 2020 (Unaudited)
different communities at different times with
varying levels of severity. We cannot, however, predict the impact that natural or man-made disasters, including the COVID-19 pandemic, may have on the ability of our employees and third-party service providers to
continue ordinary business operations and technology functions over near- or longer-term periods.
Mortgage- and other asset-backed
securities risk
The value of any mortgage-backed
and other asset-backed securities including collateralized debt obligations, if any, held by the Fund may be affected by, among other things, changes or perceived changes in: interest rates; factors concerning the
interests in and structure of the issuer or the originator of the mortgages or other assets; the creditworthiness of the entities that provide any supporting letters of credit, surety bonds or other credit enhancements;
or the market’s assessment of the quality of underlying assets. Payment of principal and interest on some mortgage-backed securities (but not the market value of the securities themselves) may be guaranteed by
the full faith and credit of a particular U.S. Government agency, authority, enterprise or instrumentality, and some, but not all, are also insured or guaranteed by the U.S. Government. Mortgage-backed securities
issued by non-governmental issuers (such as commercial banks, savings and loan institutions, private mortgage insurance companies, mortgage bankers and other secondary market issuers) may entail greater risk than
obligations guaranteed by the U.S. Government. Mortgage- and other asset-backed securities are subject to liquidity risk and prepayment risk. A decline or flattening of housing values may cause delinquencies in
mortgages (especially sub-prime or non-prime mortgages) underlying mortgage-backed securities and thereby adversely affect the ability of the mortgage-backed securities issuer to make principal and/or interest
payments to mortgage-backed securities holders, including the Fund. Rising or high interest rates tend to extend the duration of mortgage- and other asset-backed securities, making their prices more volatile and more
sensitive to changes in interest rates.
Shareholder concentration risk
At June 30, 2020, affiliated
shareholders of record owned 80.3% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 10. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 11. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial.
| 54 | Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 |
Liquidity Risk
Management Program
Pursuant to Rule 22e-4 under the
1940 Act, the Fund has adopted a liquidity risk management program (Program). The Program’s principal objectives include assessing, managing and periodically reviewing the Fund’s liquidity risk. Liquidity
risk is defined as the risk that the Fund could not meet redemption requests without significant dilution of remaining investors’ interests in the Fund.
The Board has appointed the
Investment Manager as the program administrator for the Fund’s Program. The Investment Manager has delegated oversight of the Program to its Liquidity Risk Management Committee (the Committee). At a board
meeting during the fiscal period, the Committee provided the Board with a report addressing the operations of the program and assessing its adequacy and effectiveness of implementation for the period December 1, 2018,
through December 31, 2019, including:
| • | the Fund had sufficient liquidity to both meet redemptions and operate effectively on behalf of shareholders; |
| • | there were no material changes to the Program during the period; |
| • | the implementation of the Program was effective to manage the Fund’s liquidity risk; and |
| • | the Program operated adequately during the period. |
There can be no assurance that the
Program will achieve its objectives in the future. Please refer to the Fund’s prospectus for more information regarding the Fund’s exposure to liquidity risk and other principal risks to which an
investment in the Fund may be subject.
Board Consideration
and Approval of Management
Agreement
On June 17, 2020, the Board of
Trustees (the Board) and the Trustees who are not interested persons (as defined in the Investment Company Act of 1940) (the Independent Trustees) of Columbia Funds Variable Insurance Trust (the Trust) unanimously
approved the continuation of the Management Agreement (the Management Agreement) with Columbia Management Investment Advisers, LLC (the Investment Manager) with respect to Columbia Variable Portfolio – Strategic
Income Fund (the Fund), a series of the Trust. As detailed below, the Board’s Advisory Fees and Expenses Committee (the Committee) and the Board met on multiple occasions to review and discuss, among themselves,
with the management team of the Investment Manager and with an independent fee consultant, materials provided by the Investment Manager, the independent fee consultant and others before determining to approve the
continuation of the Management Agreement.
In connection with their
deliberations regarding the continuation of the Management Agreement, the Committee and the Board evaluated materials requested from the Investment Manager regarding the Fund and the Management Agreement, and
discussed these materials with representatives of the Investment Manager at Committee meetings held on March 10, 2020, April 30, 2020 and June 17, 2020 and at Board meetings held on March 11, 2020 and June 17, 2020.
In addition, the Board and its various committees consider matters bearing on the Management Agreement at other meetings throughout the year and in prior years and meet regularly with senior management of the Trust
and the Investment Manager. Through the Board’s Investment Oversight Committees, Trustees also meet with selected portfolio managers of the funds the Trustees oversee and with other investment personnel at
various times throughout the year. The Committee and the Board also consulted with the independent fee consultant, Fund counsel and the Independent Trustees’ independent legal counsel, who advised on various
matters with respect to the Committee’s and the Board’s considerations and otherwise assisted the Committee and the Board in their deliberations. On June 17, 2020, the Committee recommended that the Board
approve the continuation of the Management Agreement. On June 17, 2020, the Board, including the Independent Trustees, voting separately, unanimously approved the continuation of the Management Agreement for the
Fund.
| Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 | 55 |
Board Consideration and Approval of
Management
Agreement (continued)
The Committee and the Board considered all
information that they, their legal counsel or the Investment Manager believed reasonably necessary to evaluate and to determine whether to recommend for approval or approve the continuation of the Management
Agreement. The information and factors considered by the Committee and the Board in recommending for approval or approving the continuation of the Management Agreement for the Fund included the following:
| • | Information on the investment performance of the Fund relative to the performance of a group of mutual funds determined to be comparable to the Fund by the Investment Manager, as well as performance relative to benchmarks; |
| • | Information on the Fund’s management fees and total expenses, including information comparing the Fund’s expenses to those of a group of comparable mutual funds, as determined by the Investment Manager; |
| • | The Investment Manager’s agreement to contractually limit or cap total operating expenses for the Fund through April 30, 2021 so that total operating expenses (excluding certain fees and expenses, such as transaction costs and certain other investment related expenses, interest, taxes, acquired fund fees and expenses, and infrequent and/or unusual expenses) would not exceed a specified annual rate, as a percentage of the Fund’s net assets; |
| • | The terms and conditions of the Management Agreement; |
| • | The current and proposed terms and conditions of other agreements and arrangements with affiliates of the Investment Manager relating to the operations of the Fund, including agreements with respect to the provision of distribution, transfer agency and shareholder services to the Fund; |
| • | Descriptions of various functions performed by the Investment Manager under the Management Agreement, including portfolio management and portfolio trading practices; |
| • | Information regarding any recently negotiated management fees of similarly-managed portfolios of other institutional clients of the Investment Manager; |
| • | Information regarding the reputation, regulatory history and resources of the Investment Manager, including information regarding senior management, portfolio managers and other personnel; |
| • | Information regarding the capabilities of the Investment Manager with respect to compliance monitoring services, including an assessment of the Investment Manager’s compliance system by the Fund’s Chief Compliance Officer; and |
| • | The profitability to the Investment Manager and its affiliates from their relationships with the Fund. |
Nature, extent and quality of
services provided under the Management Agreement
The Committee and the Board
considered the nature, extent and quality of services provided to the Fund by the Investment Manager and its affiliates under the Management Agreement and under separate agreements for the provision of transfer agency
and shareholder services, and the resources dedicated to the Fund and the other Columbia Funds by the Investment Manager and its affiliates. The Committee and the Board considered, among other things, the Investment
Manager’s ability to attract, motivate and retain highly qualified research, advisory and supervisory investment professionals (including compensation programs for personnel involved in fund management,
reputation and other attributes), the portfolio management services provided by those investment professionals, and the quality of the Investment Manager’s investment research capabilities and trade execution
services. The Committee and the Board also considered the potential benefits to shareholders of investing in a mutual fund that is part of a fund complex offering exposure to a variety of asset classes and investment
disciplines and providing a variety of fund and shareholder services.
The Committee and the Board also
considered the professional experience and qualifications of the senior personnel of the Investment Manager, which included consideration of the Investment Manager’s experience with funds using an investment
strategy similar to that used by the Investment Manager for the Fund. The Committee and the Board noted the compliance programs of and the compliance-related resources provided to the Fund by the Investment Manager
and its affiliates and the resources dedicated by the Investment Manager and its affiliates to risk management, and considered the Investment Manager’s ability to provide administrative services to the Fund and
coordinate the activities of the Fund’s other service
| 56 | Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 |
Board Consideration and Approval of
Management
Agreement (continued)
providers. After reviewing these and related
factors, the Committee and the Board concluded, within the context of their overall conclusions, that the nature, extent and quality of the services provided to the Fund under the Management Agreement supported the
continuation of the Management Agreement.
Investment performance
The Committee and the Board
reviewed information about the performance of the Fund over various time periods, including performance information relative to benchmarks, information that compared the performance of the Fund to the performance of a
group of comparable mutual funds as determined by the Investment Manager, and information and analysis provided by the independent fee consultant. The Committee and the Board also reviewed a description of the
Investment Manager’s methodology for identifying the Fund’s peer groups for purposes of performance and expense comparisons. Although the Fund’s performance lagged that of a relevant peer group for
certain (although not necessarily all) periods, the Committee and the Board concluded that other factors relevant to performance were sufficient, in light of other considerations, to support continuation of the
Management Agreement. Those factors included one or more of the following: (i) that the Fund’s performance, although lagging in certain recent periods, was stronger over the longer term; (ii) that the
underperformance was attributable, to a significant extent, to investment decisions that were reasonable and consistent with the Fund’s investment strategy and policies and that the Fund was performing within a
reasonable range of expectations, given those investment decisions, market conditions and the Fund’s investment strategy; (iii) that the Fund’s performance was competitive when compared to other relevant
performance benchmarks or peer groups; and (iv) that the Investment Manager had taken or was taking steps designed to help improve the Fund’s investment performance, including, but not limited to, replacing
portfolio managers, enhancing the resources supporting the portfolio managers, or modifying investment strategies.
The Committee and the Board noted
that, through December 31, 2019, the Fund’s performance was in the fifty-seventh, thirty-fourth and twenty-seventh percentile (where the best performance would be in the first percentile) of its category
selected by the Investment Manager for the purposes of performance comparisons for the one-, three- and five-year periods, respectively.
The Committee and the Board also
considered the Investment Manager’s performance and reputation generally, the Investment Manager’s historical responsiveness to Board concerns about performance, and the Investment Manager’s
willingness to take steps intended to improve performance. After reviewing these and related factors, the Committee and the Board concluded, within the context of their overall conclusions, that the performance of the
Fund and the Investment Manager was sufficient, in light of other considerations, to support the continuation of the Management Agreement.
Investment management fee rates
and other expenses
The Committee and the Board
considered the management fees charged to the Fund under the Management Agreement as well as the total expenses incurred by the Fund. In assessing the reasonableness of the fees under the Management Agreement, the
Committee and the Board considered, among other information, the Fund’s total expense ratio as a percentage of average daily net assets. The Committee and the Board considered data provided by the Investment
Manager and the independent fee consultant. The Committee and the Board noted that, as of December 31, 2019, the Fund’s actual management fee and net total expense ratio were ranked in the second and third
quintiles, respectively, (where the lowest fees and expenses would be in the first quintile) against the Fund’s expense universe as determined by the Investment Manager for purposes of expense comparison. The
Committee and the Board also took into account the fee waiver and expense limitation arrangements agreed to by the Investment Manager, as noted above.
The Committee and the Board also
received and considered information about the management fees charged by the Investment Manager to institutional accounts. In considering the fees charged to those accounts, the Committee and the Board took into
account, among other things, the Investment Manager’s representations about the differences between managing mutual funds as compared to other types of accounts, including differences in the services provided,
differences in the risk profile of such business for the Investment Manager and the additional resources required to manage mutual funds effectively. The Committee and the Board also received and considered
information about the fees charged by the Investment Manager for sub-advisory services it provides to comparable unaffiliated funds. In evaluating the Fund’s management fees, the Committee and the Board also
took into account the demands, complexity and quality of the investment management of the Fund.
| Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 | 57 |
Board Consideration and Approval of
Management
Agreement (continued)
After reviewing these and related factors, the
Committee and the Board concluded, within the context of their overall conclusions, that the management fee rates and expenses of the Fund, in light of other considerations, supported the continuation of the
Management Agreement.
Costs of services provided and
profitability
The Committee and the Board also
took note of the costs the Investment Manager and its affiliates incur in connection with the services provided and the profitability to the Investment Manager and its affiliates from their relationships with the
Fund, and the efforts undertaken by the Investment Manager and its affiliates to manage efficiently their costs to provide such services.
The Committee and the Board also
considered the compensation directly or indirectly received by the Investment Manager’s affiliates in connection with their relationships with the Fund. The Committee and the Board reviewed information provided
by management as to the profitability to the Investment Manager and its affiliates of their relationships with the Fund, information about the allocation of expenses used to calculate profitability, and comparisons of
profitability levels realized in 2019 to profitability levels realized in 2018. When reviewing profitability, the Committee and the Board also considered court cases in which adviser profitability was an issue in
whole or in part, the performance of similarly managed funds, the performance of the Fund, and the expense ratio of the Fund. In addition, the Committee and the Board considered information provided by the Investment
Manager regarding the Investment Manager’s financial condition and comparing its profitability to that of other asset management firms that are, or are subsidiaries of, publicly traded companies. In this regard,
the Committee and the Board also considered data provided by the independent fee consultant.
After reviewing these and related
factors, the Committee and the Board concluded, within the context of their overall conclusions, that the costs of services provided and the profitability to the Investment Manager and its affiliates from their
relationships with the Fund supported the continuation of the Management Agreement.
Economies of scale
The Committee and the Board
considered the potential existence of economies of scale in the provision by the Investment Manager of services to the Fund, to groups of related funds, and to the Investment Manager’s investment advisory
clients as a whole, and whether those economies of scale were shared with the Fund through breakpoints in investment management fees or other means, such as expense limitation arrangements and additional investments
by the Investment Manager in investment, trading, compliance and other resources. The Committee and the Board noted that the management fee schedules for the Fund contained breakpoints that would reduce the fee rate
on assets above specified threshold levels.
In considering these matters, the
Committee and the Board also considered the costs of the services provided and the profitability to the Investment Manager and its affiliates from their relationships with the Fund, as noted above. After reviewing
these and related factors, the Committee and the Board concluded, within the context of their overall conclusions, that the extent to which any economies of scale were expected to be shared with the Fund supported the
continuation of the Management Agreement.
Other benefits to the Investment
Manager
The Committee and the Board
received and considered information regarding “fall-out” or ancillary benefits received by the Investment Manager and its affiliates as a result of their relationships with the Fund, such as the engagement
of the Investment Manager’s affiliates to provide distribution, transfer agency and shareholder services to the Fund. In this regard, among other matters, the Committee and the Board considered that the
Fund’s distributor retains a portion of the distribution fees from the Fund. The Committee and the Board also considered the benefits of research made available to the Investment Manager by reason of brokerage
commissions generated by the Fund’s securities transactions, and reviewed information about the Investment Manager’s practices with respect to considering brokerage and research services when allocating
portfolio transactions. In this connection, the Board also noted that the amount of research made available to the Investment Manager by reason of brokerage commissions had been declining over time, and may decline
further. The Committee and the Board recognized that the Investment Manager’s profitability would be somewhat lower without these benefits.
| 58 | Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 |
Board Consideration and Approval of
Management
Agreement (continued)
Conclusion
The Committee and the Board
reviewed all of the above considerations in reaching their decisions to recommend or approve the continuation of the Management Agreement. In their deliberations, the Trustees did not identify any particular
information that was all-important or controlling, and individual Trustees may have attributed different weights to the various factors. Based on their evaluation of all factors that they deemed to be material,
including those factors described above, and assisted by the advice of independent legal counsel, the Board, including the Independent Trustees, voting separately, unanimously approved the continuation of the
Management Agreement.
Results of Meeting of
Shareholders
At a Joint Special Meeting of
Shareholders held on April 16, 2020, shareholders of Columbia Funds Variable Insurance Trust elected each of the ten nominees for the trustees to the Board of Trustees of Columbia Funds Variable Insurance Trust, each
to hold office until he or she dies, resigns or is removed or, if sooner, until the next meeting of shareholders called for the purpose of electing trustees and until the election and qualification of his or her
successor, as follows:
| Trustee | Votes For | Votes Withheld | Abstentions |
| Janet L. Carrig | 26,231,108,809 | 1,129,334,152 | 0 |
| J. Kevin Connaughton | 26,249,644,638 | 1,110,798,323 | 0 |
| Olive Darragh | 26,323,990,658 | 1,036,452,304 | 0 |
| Douglas A. Hacker | 26,255,762,920 | 1,104,680,042 | 0 |
| Nancy T. Lukitsh | 26,332,381,722 | 1,028,061,240 | 0 |
| David M. Moffett | 26,252,719,395 | 1,107,723,567 | 0 |
| John J. Neuhauser | 26,222,694,456 | 1,137,748,505 | 0 |
| Christopher O. Petersen | 26,265,703,212 | 1,094,739,749 | 0 |
| Patrick J. Simpson | 26,222,908,024 | 1,137,534,938 | 0 |
| Natalie A. Trunow | 26,340,164,732 | 1,020,278,229 | 0 |
| Columbia Variable Portfolio – Strategic Income Fund | Semiannual Report 2020 | 59 |
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 225 Franklin Street, Boston, MA
02110-2804
© 2020 Columbia Management Investment
Advisers, LLC.
C-1525 AP (8/20)