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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-07452
AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
(Exact name of registrant as specified in charter)
11 Greenway Plaza, Suite 1000 Houston, Texas 77046
(Address of principal executive offices) (Zip code)
Sheri Morris 11 Greenway Plaza, Suite 1000 Houston, Texas 77046
(Name and address of agent for service)
Registrants telephone number, including area code: (713) 626-1919
Date of fiscal year end: 12/31
Date of reporting period: 12/31/17
Item 1. Report to Stockholders.
| ||||
Annual Report to Shareholders
|
December 31, 2017 | |||
| ||||
Invesco V.I. American Franchise Fund
|
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Funds semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The Funds Form N-Q filings are available on the SEC website, sec.gov. Copies of the Funds Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-07452 and 033-57340. The Funds most recent portfolio holdings, as filed on Form N-Q, have also been made available to insurance companies issuing variable annuity contracts and variable life insurance policies (variable products) that invest in the Fund. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/ proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
This report must be accompanied or preceded by a currently effective Fund prospectus and variable product prospectus, which contain more complete information, including sales charges and expenses. Investors should read each carefully before investing.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
Invesco Distributors, Inc. VK-VIAMFR-AR-1 02082018 1148 |
Managements Discussion of Fund Performance
Invesco V.I. American Franchise Fund
Invesco V.I. American Franchise Fund
Your Funds Long-Term Performance
Results of a $10,000 Investment Oldest Share Class(es)
Fund and index data from 12/31/07
1 | Source: FactSet Research Systems Inc. |
2 | Source: Lipper Inc. |
Past performance cannot guarantee
comparable future results.
Invesco V.I. American Franchise Fund
Invesco V.I. American Franchise Funds investment objective is to seek capital growth.
∎ | Unless otherwise stated, information presented in this report is as of December 31, 2017, and is based on total net assets. |
∎ | Unless otherwise noted, all data provided by Invesco. |
Invesco V.I. American Franchise Fund
Schedule of Investments(a)
December 31, 2017
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. American Franchise Fund
Investment Abbreviations:
ADR | American Depositary Receipt | |
REIT | Real Estate Investment Trust |
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poors. |
(b) | Non-income producing security. |
(c) | All or a portion of this security was out on loan at December 31, 2017. |
(d) | The money market fund and the Fund are affiliated by having the same investment adviser. The rate shown is the 7-day SEC standardized yield as of December 31, 2017. |
(e) | The security has been segregated to satisfy the commitment to return the cash collateral received in securities lending transactions upon the borrowers return of the securities loaned. See Note 1I. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. American Franchise Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. American Franchise Fund
Statement of Changes in Net Assets
For the years ended December 31, 2017 and 2016
2017 | 2016 | |||||||
Operations: |
||||||||
Net investment income (loss) |
$ | (832,957 | ) | $ | 350,872 | |||
Net realized gain |
40,086,602 | 49,357,647 | ||||||
Change in net unrealized appreciation (depreciation) |
111,505,076 | (39,458,443 | ) | |||||
Net increase in net assets resulting from operations |
150,758,721 | 10,250,076 | ||||||
Distributions to shareholders from net investment income Series I |
(384,589 | ) | | |||||
Distributions to shareholders from net realized gains: |
||||||||
Series l |
(37,510,459 | ) | (38,558,239 | ) | ||||
Series ll |
(13,392,445 | ) | (14,444,619 | ) | ||||
Total distributions from net realized gains |
(50,902,904 | ) | (53,002,858 | ) | ||||
Share transactionsnet: |
||||||||
Series l |
(2,950,365 | ) | (27,715,041 | ) | ||||
Series ll |
(6,716,707 | ) | (12,325,839 | ) | ||||
Net increase (decrease) in net assets resulting from share transactions |
(9,667,072 | ) | (40,040,880 | ) | ||||
Net increase (decrease) in net assets |
89,804,156 | (82,793,662 | ) | |||||
Net assets: |
||||||||
Beginning of year |
572,423,179 | 655,216,841 | ||||||
End of year (includes undistributed net investment income (loss) of $(341,144) and $33,922, respectively) |
$ | 662,227,335 | $ | 572,423,179 |
Notes to Financial Statements
December 31, 2017
NOTE 1Significant Accounting Policies
Invesco V.I. American Franchise Fund (the Fund) is a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Trust). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end series management investment company consisting of twenty-four separate portfolios, (each constituting a Fund). The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each Fund or class will be voted on exclusively by the shareholders of such Fund or class. Current Securities and Exchange Commission (SEC) guidance, however, requires participating insurance companies offering separate accounts to vote shares proportionally in accordance with the instructions of the contract owners whose investments are funded by shares of each Fund or class.
The Funds investment objective is to seek capital growth.
The Fund currently offers two classes of shares, Series I and Series II, both of which are offered to insurance company separate accounts funding variable annuity contracts and variable life insurance policies (variable products).
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946, Financial Services Investment Companies.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations Securities, including restricted securities, are valued according to the following policy. |
A security listed or traded on an exchange (except convertible securities) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and asked prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and asked prices. For purposes of determining net asset value (NAV) per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (NYSE).
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end-of-day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
Debt obligations (including convertible securities) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual
Invesco V.I. American Franchise Fund
trading characteristics and other market data. Pricing services generally value debt obligations assuming orderly transactions of institutional round lot size, but a fund may hold or transact in the same securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Foreign securities (including foreign exchange contracts) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that the investment adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trusts officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/asked quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a securitys fair value.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuers assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
B. | Securities Transactions and Investment Income Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any) is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Funds net asset value and, accordingly, they reduce the Funds total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and the Statement of Changes in Net Assets, or the net investment income per share and the ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. | Country Determination For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuers securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
D. | Distributions Distributions from net investment income and net realized capital gain, if any, are generally declared and paid to separate accounts of participating insurance companies annually and recorded on the ex-dividend date. |
E. | Federal Income Taxes The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the Internal Revenue Code), necessary to qualify as a regulated investment company and to distribute substantially all of the Funds taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. |
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Funds uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
Invesco V.I. American Franchise Fund
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
F. | Expenses Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
G. | Accounting Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
H. | Indemnifications Under the Trusts organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Funds servicing agreements, that contain a variety of indemnification clauses. The Funds maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
I. | Securities Lending The Fund may lend portfolio securities having a market value up to one-third of the Funds total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily by the securities lending provider. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its sponsored agencies. Cash collateral received in connection with these loans is invested in short-term money market instruments or affiliated money market funds and is shown as such on the Schedule of Investments. The Fund bears the risk of loss with respect to the investment of collateral. It is the Funds policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. When loaning securities, the Fund retains certain benefits of owning the securities, including the economic equivalent of dividends or interest generated by the security. Lending securities entails a risk of loss to the Fund if, and to the extent that, the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower failed to return the securities. The securities loaned are subject to termination at the option of the borrower or the Fund. Upon termination, the borrower will return to the Fund the securities loaned and the Fund will return the collateral. Upon the failure of the borrower to return the securities, collateral may be liquidated and the securities may be purchased on the open market to replace the loaned securities. The Fund could experience delays and costs in gaining access to the collateral and the securities may lose value during the delay which could result in potential losses to the Fund. Some of these losses may be indemnified by the lending agent. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to any loss on the collateral invested. Dividends received on cash collateral investments for securities lending transactions, which are net of compensation to counterparties, are included in Dividends from affiliated money market funds on the Statement of Operations. The aggregate value of securities out on loan, if any, is shown as a footnote on the Statement of Assets and Liabilities. |
J. | Foreign Currency Translations Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Funds books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. |
The Fund may invest in foreign securities, which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests and are shown in the Statement of Operations.
K. | Forward Foreign Currency Contracts The Fund may engage in foreign currency transactions either on a spot (i.e. for prompt delivery and settlement) basis, or through forward foreign currency contracts, to manage or minimize currency or exchange rate risk. |
The Fund may also enter into forward foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to lock in the U.S. dollar price of that security, or the Fund may also enter into forward foreign currency contracts that do not provide for physical settlement of the two currencies, but instead are settled by a single cash payment calculated as the difference between the agreed upon exchange rate and the spot rate at settlement based upon an agreed upon notional amount (non-deliverable forwards). The Fund will set aside liquid assets in an amount equal to the daily mark-to-market obligation for forward foreign currency contracts.
A forward foreign currency contract is an obligation between two parties (Counterparties) to purchase or sell a specific currency for an agreed-upon price at a future date. The use of forward foreign currency contracts does not eliminate fluctuations in the price of the underlying securities the Fund owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statement of Operations. The primary risks associated with forward foreign currency contracts include failure of the Counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities.
Invesco V.I. American Franchise Fund
NOTE 2Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the Adviser or Invesco). Under the terms of the investment advisory agreement, the Fund accrues daily and pays monthly an advisory fee to the Adviser based on the annual rate of the Funds average daily net assets as follows:
Average Daily Net Assets | Rate | |||||||
First $250 million |
0 | .695% | ||||||
Next $250 million |
0 | .67% | ||||||
Next $500 million |
0 | .645% | ||||||
Next $550 million |
0 | .62% | ||||||
Next $3.45 billion |
0 | .60% | ||||||
Next $250 million |
0 | .595% | ||||||
Next $2.25 billion |
0 | .57% | ||||||
Next $2.5 billion |
0 | .545% | ||||||
Over $10 billion |
0 | .52% |
For the year ended December 31, 2017, the effective advisory fees incurred by the Fund was 0.67%.
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. and separate sub-advisory agreements with Invesco PowerShares Capital Management LLC and Invesco Asset Management (India) Private Limited (collectively, the Affiliated Sub-Advisers) the Adviser, not the Fund, will pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2018, to waive advisory fees and/or reimburse expenses to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Series I shares to 2.00% and Series II shares to 2.25% of average daily net assets (the expense limits). In determining the Advisers obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on June 30, 2018. During its term, the fee waiver agreement cannot be terminated or amended to increase the expense limits or reduce the advisory fee waiver without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
Further, the Adviser has contractually agreed, through at least June 30, 2019, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash (excluding investments of cash collateral from securities lending) in such affiliated money market funds.
For the year ended December 31, 2017, the Adviser waived advisory fees of $2,504.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco a fee for costs incurred in providing accounting services and fund administrative services to the Fund and to reimburse Invesco for fees paid to insurance companies that have agreed to provide certain administrative services to the Fund. These administrative services provided by the insurance companies may include, among other things: maintenance of master accounts with the Fund; tracking, recording and transmitting net purchase and redemption orders for Fund shares; maintaining and preserving records related to the purchase, redemption and other account activity of variable product owners; distributing copies of Fund documents such as prospectuses, proxy materials and periodic reports, to variable product owners, and responding to inquiries from variable product owners about the Fund. Pursuant to such agreement, for the year ended December 31, 2017, Invesco was paid $152,667 for accounting and fund administrative services and was reimbursed $959,447 for fees paid to insurance companies.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (IIS) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. For the year ended December 31, 2017, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
The Trust has entered into a master distribution agreement with Invesco Distributors, Inc. (IDI) to serve as the distributor for the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Funds Series II shares (the Plan). The Fund, pursuant to the Plan, pays IDI compensation at the annual rate of 0.25% of the Funds average daily net assets of Series II shares. The fees are accrued daily and paid monthly. Of the Plan payments, up to 0.25% of the average daily net assets of the Series II shares may be paid to insurance companies who furnish continuing personal shareholder services to customers who purchase and own Series II shares of the Fund. For the year ended December 31, 2017, expenses incurred under the Plan are detailed in the Statement of Operations as Distribution fees.
For the year ended December 31, 2017, the Fund incurred $3,244 in brokerage commissions with Invesco Capital Markets, Inc., an affiliate of the Adviser and IDI, for portfolio transactions executed on behalf of the Fund.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
Invesco V.I. American Franchise Fund
NOTE 3Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investments assigned level:
Level 1 | Prices are determined using quoted prices in an active market for identical assets. |
Level 2 | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Level 3 | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Funds own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of December 31, 2017. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
The Funds policy is to recognize transfers in and out of the valuation levels as of the end of the reporting period. During the year ended December 31, 2017, there were no material transfers between valuation levels.
Investments in Securities | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Investments in Securities | ||||||||||||||||
Common Stocks & Other Equity Interests |
$ | 625,453,159 | $ | 35,936,729 | $ | | $ | 661,389,888 | ||||||||
Money Market Funds |
1,826,861 | | | 1,826,861 | ||||||||||||
Total Investments |
$ | 627,280,020 | $ | 35,936,729 | $ | | $ | 663,216,749 |
NOTE 4Security Transactions with Affiliated Funds
The Fund is permitted to purchase or sell securities from or to certain other Invesco Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment adviser (or affiliated investment advisers), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, for the year ended December 31, 2017, the Fund engaged in securities sales of $3,445,769, which resulted in net realized gains of $84,877.
NOTE 5Trustees and Officers Fees and Benefits
Trustees and Officers Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees and Officers Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees were eligible to participate in a retirement plan that provided for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees and Officers Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 6Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period-end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
Invesco V.I. American Franchise Fund
NOTE 7Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended December 31, 2017 and 2016:
2017 | 2016 | |||||||
Ordinary income |
$ | 384,589 | $ | | ||||
Long-term capital gain |
50,902,904 | 53,002,858 | ||||||
Total distributions |
$ | 51,287,493 | $ | 53,002,858 |
Tax Components of Net Assets at Period-End:
2017 | ||||
Undistributed ordinary income |
$ | 3,546,315 | ||
Undistributed long-term gain |
34,579,921 | |||
Net unrealized appreciation investments |
287,750,027 | |||
Net unrealized appreciation (depreciation) foreign currencies |
(72 | ) | ||
Temporary book/tax differences |
(341,144 | ) | ||
Shares of beneficial interest |
336,692,288 | |||
Total net assets |
$ | 662,227,335 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Funds net unrealized appreciation (depreciation) difference is attributable primarily to wash sales.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Funds temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund does not have a capital loss carryforward as of December 31, 2017.
NOTE 8Investment Transactions
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended December 31, 2017 was $284,830,502 and $345,009,548, respectively. Cost of investments, including any derivatives, on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investments on a Tax Basis | ||||
Aggregate unrealized appreciation of investments |
$ | 291,880,706 | ||
Aggregate unrealized (depreciation) of investments |
(4,130,679 | ) | ||
Net unrealized appreciation of investments |
$ | 287,750,027 |
Cost of investments for tax purposes is $375,466,722.
NOTE 9Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of net operating losses, on December 31, 2017, undistributed net investment income (loss) was increased by $842,480 and undistributed net realized gain was decreased by $842,480. This reclassification had no effect on the net assets of the Fund.
Invesco V.I. American Franchise Fund
NOTE 10Share Information
Summary of Share Activity | ||||||||||||||||
Years ended December 31, | ||||||||||||||||
2017(a) | 2016 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: |
||||||||||||||||
Series I |
632,683 | $ | 39,590,013 | 222,257 | $ | 12,031,047 | ||||||||||
Series II |
193,178 | 11,491,194 | 131,825 | 6,897,330 | ||||||||||||
Issued as reinvestment of dividends: |
||||||||||||||||
Series I |
623,684 | 37,895,048 | 705,807 | 38,558,239 | ||||||||||||
Series II |
228,151 | 13,392,445 | 272,488 | 14,444,619 | ||||||||||||
Reacquired: |
||||||||||||||||
Series I |
(1,308,965 | ) | (80,435,426 | ) | (1,438,141 | ) | (78,304,327 | ) | ||||||||
Series II |
(527,169 | ) | (31,600,346 | ) | (636,218 | ) | (33,667,788 | ) | ||||||||
Net increase (decrease) in share activity |
(158,438 | ) | $ | (9,667,072 | ) | (741,982 | ) | $ | (40,040,880 | ) |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 22% of the outstanding shares of the Fund. The Fund and the Funds principal underwriter or adviser, are parties to participation agreements with these entities whereby these entities sell units of interest in separate accounts funding variable products that are invested in the Fund. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
NOTE 11Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Net asset value, beginning of period |
Net (loss)(a) |
Net gains on securities |
Total from investment operations |
Dividends from net investment income |
Distributions from net realized gains |
Total distributions |
Net asset value, end of period |
Total return(b) |
Net assets, end of period (000s omitted) |
Ratio of net assets |
Ratio of expenses to average net assets without fee waivers and/or expenses absorbed |
Ratio of net investment income (loss) to average net assets |
Portfolio turnover(c) |
|||||||||||||||||||||||||||||||||||||||||||
Series I |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/17 |
$ | 53.58 | $ | (0.04 | ) | $ | 14.50 | $ | 14.46 | $ | (0.05 | ) | $ | (5.02 | ) | $ | (5.07 | ) | $ | 62.97 | 27.34 | % | $ | 491,271 | 0.89 | %(d) | 0.89 | %(d) | (0.06 | )%(d) | 45 | % | ||||||||||||||||||||||||
Year ended 12/31/16 |
57.30 | 0.07 | 1.33 | 1.40 | | (5.12 | ) | (5.12 | ) | 53.58 | 2.27 | 420,824 | 0.93 | 0.93 | 0.12 | 59 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 |
54.88 | (0.03 | ) | 2.76 | 2.73 | | (0.31 | ) | (0.31 | ) | 57.30 | 5.01 | 479,298 | 0.96 | 0.96 | (0.05 | ) | 68 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 |
50.63 | (0.09 | ) | 4.36 | 4.27 | (0.02 | ) | | (0.02 | ) | 54.88 | 8.44 | 541,929 | 0.92 | 0.95 | (0.17 | ) | 64 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 |
36.28 | 0.04 | 14.50 | 14.54 | (0.19 | ) | | (0.19 | ) | 50.63 | 40.13 | 580,620 | 0.90 | 0.96 | 0.08 | 75 | ||||||||||||||||||||||||||||||||||||||||
Series II |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/17 |
51.95 | (0.19 | ) | 14.05 | 13.86 | | (5.02 | ) | (5.02 | ) | 60.79 | 27.03 | 170,956 | 1.14 | (d) | 1.14 | (d) | (0.31 | )(d) | 45 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/16 |
55.85 | (0.06 | ) | 1.28 | 1.22 | | (5.12 | ) | (5.12 | ) | 51.95 | 2.00 | 151,599 | 1.18 | 1.18 | (0.13 | ) | 59 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 |
53.63 | (0.16 | ) | 2.69 | 2.53 | | (0.31 | ) | (0.31 | ) | 55.85 | 4.75 | 175,919 | 1.21 | 1.21 | (0.30 | ) | 68 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 |
49.58 | (0.22 | ) | 4.27 | 4.05 | | | | 53.63 | 8.17 | 199,141 | 1.17 | 1.20 | (0.42 | ) | 64 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 |
35.55 | (0.07 | ) | 14.20 | 14.13 | (0.10 | ) | | (0.10 | ) | 49.58 | 39.79 | 257,788 | 1.15 | 1.21 | (0.17 | ) | 75 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year, if applicable, and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns. |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. |
(d) | Ratios are based on average daily net assets (000s omitted) of $473,756 and $168,276 for Series I and Series II shares, respectively. |
Invesco V.I. American Franchise Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) and Shareholders of Invesco V.I. American Franchise Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Invesco V.I. American Franchise Fund (one of the funds constituting AIM Variable Insurance Funds (Invesco Variable Insurance Funds), hereafter referred to as the Fund) as of December 31, 2017, the related statement of operations for the year ended December 31, 2017, the statement of changes in net assets for each of the two years in the period ended December 31, 2017, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2017 (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2017 and the financial highlights for each of the five years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Funds management. Our responsibility is to express an opinion on the Funds financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2017 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, TX
February 14, 2018
We have served as the auditor of one or more of the investment companies in the Invesco/PowerShares group of investment companies since at least 1995. We have not determined the specific year we began serving as auditor.
Invesco V.I. American Franchise Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period July 1, 2017 through December 31, 2017.
The actual and hypothetical expenses in the examples below do not represent the effect of any fees or other expenses assessed in connection with a variable product; if they did, the expenses shown would be higher while the ending account values shown would be lower.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled Actual Expenses Paid During Period to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Funds actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs. Therefore, the hypothetical information is useful in comparing ongoing costs, and will not help you determine the relative total costs of owning different funds.
Class | Beginning Account Value (07/01/17) |
ACTUAL | HYPOTHETICAL expenses) |
Annualized Expense Ratio |
||||||||||||||||||||
Ending Account Value (12/31/17)1 |
Expenses Paid During Period2 |
Ending Account Value (12/31/17) |
Expenses Paid During Period2 |
|||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 1,079.20 | $ | 4.61 | $ | 1,020.77 | $ | 4.48 | 0.88 | % | ||||||||||||
Series II | 1,000.00 | 1,078.20 | 5.92 | 1,019.51 | 5.75 | 1.13 |
1 | The actual ending account value is based on the actual total return of the Fund for the period July 1, 2017 through December 31, 2017, after actual expenses and will differ from the hypothetical ending account value which is based on the Funds expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Funds annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half year. |
Invesco V.I. American Franchise Fund
Tax Information
Form 1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific states requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended December 31, 2017:
Federal and State Income Tax |
||||
Long-Term Capital Gain Distributions |
$ | 50,902,904 | ||
Corporate Dividends Received Deduction* |
100 | % | ||
U.S. Treasury Obligations* |
0 | % |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Funds fiscal year. |
Invesco V.I. American Franchise Fund
Trustees and Officers
The address of each trustee and officer is AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Trust), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trusts organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 1960 Trustee |
2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business
Formerly: Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US), Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) |
158 | None | ||||
Philip A. Taylor2 1954 Trustee and Senior Vice President |
2006 | Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco Aim Management Group, Inc.) (financial services holding company); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.) (registered transfer agent); Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company); Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management).
Formerly: Co-Chairman, Co-President and Co-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chief Executive Officer and President, Van Kampen Exchange Corp; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurers Series Trust (Invesco Treasurers Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurers Series Trust (Invesco Treasurers Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) (registered broker dealer); Manager, Invesco PowerShares Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco Aim Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurers Series Trust (Invesco Treasurers Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. |
158 | None |
1 | Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser. |
2 | Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser. |
Invesco V.I. American Franchise Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Independent Trustees | ||||||||
Bruce L. Crockett 1944 Trustee and Chair |
1993 | Chairman, Crockett Technologies Associates (technology consulting company)
Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute: Member of the Audit Committee, Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council |
158 | Director and Chairman of the Audit Committee, ALPS (Attorneys Liability Protection Society) (insurance company); Director and Member of the Audit Committee and Compensation Committee, Ferroglobe PLC (metallurgical company) | ||||
David C. Arch 1945 Trustee |
2010 | Chairman of Blistex Inc. (consumer health care products manufacturer); Member, World Presidents Organization | 158 | Board member of the Illinois Manufacturers Association | ||||
Jack M. Fields 1952 Trustee |
1997 | Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Chairman, Discovery Learning Alliance (non-profit)
Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff) (human resources provider); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives |
158 | None | ||||
Cynthia Hostetler 1962 Trustee |
2017 | Non-Executive Director and Trustee of a number of public and private business corporations
Formerly: Head of Investment Funds and Private Equity, Overseas Private Investment Corporation; President, First Manhattan Bancorporation, Inc.; Attorney, Simpson Thacher & Bartlett LLP |
158 | Vulcan Materials Company (construction materials company); Trilinc Global Impact Fund; Aberdeen Investment Funds (4 portfolios); Artio Global Investment LLC (mutual fund complex); Edgen Group, Inc. (specialized energy and infrastructure products distributor) | ||||
Eli Jones 1961 Trustee |
2016 | Professor and Dean, Mays Business School Texas A&M University
Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University; Director, Arvest Bank |
158 | Insperity, Inc. (formerly known as Administaff) (human resources provider) | ||||
Prema Mathai-Davis 1950 Trustee |
1998 | Retired. | 158 | None | ||||
Teresa M. Ressel 1962 Trustee |
2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Chief Financial Officer, Olayan America, The Olayan Group (international investor/commercial/industrial); Chief Executive Officer, UBS Securities LLC; Group Chief Operating Officer, Americas, UBS AG; Assistant Secretary for Management & Budget and CFO, US Department of the Treasury |
158 | Atlantic Power Corporation (power generation company); ON Semiconductor Corp. (semiconductor supplier) | ||||
Ann Barnett Stern 1957 Trustee |
2017 | President and Chief Executive Officer, Houston Endowment Inc. (private philanthropic institution)
Formerly: Executive Vice President and General Counsel, Texas Childrens Hospital; Attorney, Beck, Redden and Secrest, LLP; Business Law Instructor, University of St. Thomas; Attorney, Andrews & Kurth LLP |
158 | Federal Reserve Bank of Dallas | ||||
Raymond Stickel, Jr. 1944 Trustee |
2005 | Retired.
Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios); Partner, Deloitte & Touche |
158 | None | ||||
Robert C. Troccoli 1949 Trustee |
2016 | Adjunct Professor, University of Denver Daniels College of Business
Formerly: Senior Partner, KPMG LLP |
158 | None | ||||
Christopher L. Wilson 1957 Trustee |
2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Managing Partner, CT2, LLC (investing and consulting firm); President/Chief Executive Officer, Columbia Funds, Bank of America Corporation; President/Chief Executive Officer, CDC IXIS Asset Management Services, Inc.; Principal & Director of Operations, Scudder Funds, Scudder, Stevens & Clark, Inc.; Assistant Vice President, Fidelity Investments |
158 | TD Asset Management USA Inc. (mutual fund complex) (22 portfolios); ISO New England, Inc. (non-profit organization managing regional electricity market) |
Invesco V.I. American Franchise Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers | ||||||||
Sheri Morris 1964 President, Principal Executive Officer and Treasurer |
1999 | President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco Aim Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; and Treasurer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust and PowerShares Actively Managed Exchange-Traded Fund Trust |
N/A | N/A | ||||
Russell C. Burk 1958 Senior Vice President and Senior Officer |
2005 | Senior Vice President and Senior Officer, The Invesco Funds | N/A | N/A | ||||
John M. Zerr 1962 Senior Vice President, Chief Legal Officer and Secretary |
2006 | Director, Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Managing Director, Invesco PowerShares Capital Management LLC; Director, Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust; Manager and Secretary, Invesco Indexing LLC
Formerly: Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser); Vice President and Secretary, PBHG Funds (an investment company) and PBHG Insurance Series Fund (an investment company); Chief Operating Officer, General Counsel and Secretary, Old Mutual Investment Partners (a broker-dealer); General Counsel and Secretary, Old Mutual Fund Services (an administrator) and Old Mutual Shareholder Services (a shareholder servicing center); Executive Vice President, General Counsel and Secretary, Old Mutual Capital, Inc. (an investment adviser); and Vice President and Secretary, Old Mutual Advisors Funds (an investment company) |
N/A | N/A | ||||
Gregory G. McGreevey 1962 Senior Vice President |
2012 | Senior Managing Director, Invesco Ltd.; Director, Chairman, President, and Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President, Invesco Management Group, Inc.; Director, Invesco Mortgage Capital, Inc. and Invesco Senior Secured Management, Inc.; and Senior Vice President, The Invesco Funds
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A | ||||
Kelli Gallegos 1970 Vice President, Principal Financial Officer and Assistant Treasurer |
2008 | Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A |
Invesco V.I. American Franchise Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers(continued) | ||||||||
Tracy Sullivan 1962 Vice President, Chief Tax Officer and Assistant Treasurer |
2008 | Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A | ||||
Crissie M. Wisdom 1969 Anti-Money Laundering Compliance Officer |
2013 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., Invesco Management Group, Inc., The Invesco Funds, and PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp. |
N/A | N/A | ||||
Robert R. Leveille 1969 Chief Compliance Officer |
2016 | Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds
Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds |
N/A | N/A |
The Statement of Additional Information of the Trust includes additional information about the Funds Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Funds Statement of Additional Information for information on the Funds sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 |
Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Auditors PricewaterhouseCoopers LLP 1000 Louisiana Street, Suite 5800 Houston, TX 77002-5678 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2005 Market Street, Suite 2600 Philadelphia, PA 19103-7018 |
Counsel to the Independent Trustees Goodwin Procter LLP 901 New York Avenue, N.W. Washington, D.C. 20001 |
Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
Invesco V.I. American Franchise Fund
| ||||
Annual Report to Shareholders
|
December 31, 2017
| |||
Invesco V.I. American Value Fund |
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Funds semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The Funds Form N-Q filings are available on the SEC website, sec.gov. Copies of the Funds Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-07452 and 033-57340. The Funds most recent portfolio holdings, as filed on Form N-Q, have also been made available to insurance companies issuing variable annuity contracts and variable life insurance policies (variable products) that invest in the Fund. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/ proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
This report must be accompanied or preceded by a currently effective Fund prospectus and variable product prospectus, which contain more complete information, including sales charges and expenses. Investors should read each carefully before investing.
| ||||
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE | ||||
Invesco Distributors, Inc. |
VK-VIAMVA-AR-1 02072018 1226 |
Managements Discussion of Fund Performance
Invesco V.I. American Value Fund
Invesco V.I. American Value Fund
Your Funds Long-Term Performance
Results of a $10,000 Investment Oldest Share Class(es)
Fund and index data from 12/31/07
1 Source: FactSet Research Systems Inc.
2 Source: Lipper Inc.
Past performance cannot guarantee
comparable future results.
Invesco V.I. American Value Fund
Invesco V.I. American Value Funds investment objective is to provide above-average total return over a market cycle of three to five years by investing in common stocks and other equity securities.
∎ | Unless otherwise stated, information presented in this report is as of December 31, 2017, and is based on total net assets. |
∎ | Unless otherwise noted, all data provided by Invesco. |
Invesco V.I. American Value Fund
Invesco V.I. American Value Fund
Schedule of Investments(a)
December 31, 2017
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. American Value Fund
Investment Abbreviations:
REIT | Real Estate Investment Trust |
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poors. |
(b) | Non-income producing security. |
(c) | The money market fund and the Fund are affiliated by having the same investment adviser. The rate shown is the 7-day SEC standardized yield as of December 31, 2017. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. American Value Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. American Value Fund
Statement of Changes in Net Assets
For the years ended December 31, 2017 and 2016
2017 | 2016 | |||||||
Operations: |
||||||||
Net investment income |
$ | 1,181,060 | $ | 2,431,847 | ||||
Net realized gain |
43,350,554 | 4,201,151 | ||||||
Change in net unrealized appreciation (depreciation) |
(9,438,439 | ) | 46,182,088 | |||||
Net increase in net assets resulting from operations |
35,093,175 | 52,815,086 | ||||||
Distributions to shareholders from net investment income: |
||||||||
Series I |
(854,814 | ) | (412,019 | ) | ||||
Series ll |
(1,557,213 | ) | (301,616 | ) | ||||
Total distributions from net investment income |
(2,412,027 | ) | (713,635 | ) | ||||
Distributions to shareholders from net realized gains: |
||||||||
Series l |
(1,223,615 | ) | (6,365,699 | ) | ||||
Series ll |
(3,080,153 | ) | (14,638,628 | ) | ||||
Total distributions from net realized gains |
(4,303,768 | ) | (21,004,327 | ) | ||||
Share transactionsnet: |
||||||||
Series l |
(20,241,160 | ) | (19,286,477 | ) | ||||
Series ll |
(9,832,937 | ) | 52,953,285 | |||||
Net increase (decrease) in net assets resulting from share transactions |
(30,074,097 | ) | 33,666,808 | |||||
Net increase (decrease) in net assets |
(1,696,717 | ) | 64,763,932 | |||||
Net assets: |
||||||||
Beginning of year |
400,804,365 | 336,040,433 | ||||||
End of year (includes undistributed net investment income of $870,117 and $2,350,923, respectively) |
$ | 399,107,648 | $ | 400,804,365 |
Notes to Financial Statements
December 31, 2017
NOTE 1Significant Accounting Policies
Invesco V.I. American Value Fund (the Fund) is a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Trust). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end series management investment company consisting of twenty-four separate portfolios, (each constituting a Fund). The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each Fund or class will be voted on exclusively by the shareholders of such Fund or class. Current Securities and Exchange Commission (SEC) guidance, however, requires participating insurance companies offering separate accounts to vote shares proportionally in accordance with the instructions of the contract owners whose investments are funded by shares of each Fund or class.
The Funds investment objective is to provide above-average total return over a market cycle of three to five years by investing in common stocks and other equity securities.
The Fund currently offers two classes of shares, Series I and Series II, both of which are offered to insurance company separate accounts funding variable annuity contracts and variable life insurance policies (variable products).
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946, Financial Services Investment Companies.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations Securities, including restricted securities, are valued according to the following policy. |
A security listed or traded on an exchange (except convertible securities) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and asked prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and asked prices. For purposes of determining net asset value (NAV) per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (NYSE).
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end-of-day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
Invesco V.I. American Value Fund
Debt obligations (including convertible securities) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual trading characteristics and other market data. Pricing services generally value debt obligations assuming orderly transactions of institutional round lot size, but a fund may hold or transact in the same securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Foreign securities (including foreign exchange contracts) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that the investment adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trusts officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/asked quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a securitys fair value.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuers assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
B. | Securities Transactions and Investment Income Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any) is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Funds net asset value and, accordingly, they reduce the Funds total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and the Statement of Changes in Net Assets, or the net investment income per share and the ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. | Distributions Distributions from net investment income and net realized capital gain, if any, are generally declared and paid to separate accounts of participating insurance companies annually and recorded on the ex-dividend date. |
D. | Federal Income Taxes The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the Internal Revenue Code), necessary to qualify as a regulated investment company and to distribute substantially all of the Funds taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. |
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Funds uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
Invesco V.I. American Value Fund
E. | Country Determination For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuers securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
F. | Expenses Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
G. | Accounting Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
H. | Indemnifications Under the Trusts organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Funds servicing agreements, that contain a variety of indemnification clauses. The Funds maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
I. | Foreign Currency Translations Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Funds books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. |
The Fund may invest in foreign securities, which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests and are shown in the Statement of Operations.
J. | Forward Foreign Currency Contracts The Fund may engage in foreign currency transactions either on a spot (i.e. for prompt delivery and settlement) basis, or through forward foreign currency contracts, to manage or minimize currency or exchange rate risk. |
The Fund may also enter into forward foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to lock in the U.S. dollar price of that security, or the Fund may also enter into forward foreign currency contracts that do not provide for physical settlement of the two currencies, but instead are settled by a single cash payment calculated as the difference between the agreed upon exchange rate and the spot rate at settlement based upon an agreed upon notional amount (non-deliverable forwards). The Fund will set aside liquid assets in an amount equal to the daily mark-to-market obligation for forward foreign currency contracts.
A forward foreign currency contract is an obligation between two parties (Counterparties) to purchase or sell a specific currency for an agreed-upon price at a future date. The use of forward foreign currency contracts does not eliminate fluctuations in the price of the underlying securities the Fund owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statement of Operations. The primary risks associated with forward foreign currency contracts include failure of the Counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities.
NOTE 2Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the Adviser or Invesco). Under the terms of the investment advisory agreement, the Fund accrues daily and pays monthly an advisory fee to the Adviser based on the annual rate of the Funds average daily net assets as follows:
Average Daily Net Assets | Rate | |||
First $1 billion |
0.72% | |||
Over $1 billion |
0.65% |
For the year ended December 31, 2017, the effective advisory fees incurred by the Fund was 0.72%.
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. and separate sub-advisory agreements with Invesco PowerShares Capital Management LLC and Invesco Asset Management (India)
Invesco V.I. American Value Fund
Private Limited (collectively, the Affiliated Sub-Advisers) the Adviser, not the Fund, will pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2018, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Series I shares to 2.00% and Series II shares to 2.25% of average daily net assets (the expense limits). In determining the Advisers obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on June 30, 2018. During its term, the fee waiver agreement cannot be terminated or amended to increase the expense limits or reduce the advisory fee waiver without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
Further, the Adviser has contractually agreed, through at least June 30, 2019, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the year ended December 31, 2017, the Adviser waived advisory fees of $14,950.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco a fee for costs incurred in providing accounting services and fund administrative services to the Fund and to reimburse Invesco for fees paid to insurance companies that have agreed to provide certain administrative services to the Fund. These administrative services provided by the insurance companies may include, among other things: maintenance of master accounts with the Fund; tracking, recording and transmitting net purchase and redemption orders for Fund shares; maintaining and preserving records related to the purchase, redemption and other account activity of variable product owners; distributing copies of Fund documents such as prospectuses, proxy materials and periodic reports, to variable product owners, and responding to inquiries from variable product owners about the Fund. Pursuant to such agreement, for the year ended December 31, 2017, Invesco was paid $94,196 for accounting and fund administrative services and was reimbursed $581,330 for fees paid to insurance companies.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (IIS) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. For the year ended December 31, 2017, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
The Trust has entered into a master distribution agreement with Invesco Distributors, Inc. (IDI) to serve as the distributor for the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Funds Series II shares (the Plan). The Fund, pursuant to the Plan, pays IDI compensation at the annual rate of 0.25% of the Funds average daily net assets of Series II shares. The fees are accrued daily and paid monthly. Of the Plan payments, up to 0.25% of the average daily net assets of the Series II shares may be paid to insurance companies who furnish continuing personal shareholder services to customers who purchase and own Series II shares of the Fund. For the year ended December 31, 2017, expenses incurred under the Plan are detailed in the Statement of Operations as Distribution fees.
For the year ended December 31, 2017, the Fund incurred $12,117 in brokerage commissions with Invesco Capital Markets, Inc., an affiliate of the Adviser and IDI, for portfolio transactions executed on behalf of the Fund.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
NOTE 3Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investments assigned level:
Level 1 | Prices are determined using quoted prices in an active market for identical assets. |
Level 2 | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Level 3 | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Funds own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
As of December 31, 2017 all securities in this Fund were valued based on Level 1 inputs (see the Schedule of Investment for security categories). The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
The Funds policy is to recognize transfers in and out of the valuation levels as of the end of the reporting period. During the year ended December 31, 2017, there were no material transfers between valuation levels.
Invesco V.I. American Value Fund
NOTE 4Security Transactions with Affiliated Funds
The Fund is permitted to purchase or sell securities from or to certain other Invesco Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment adviser (or affiliated investment advisers), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, for the year ended December 31, 2017, the Fund engaged in securities purchases of $2,145,510.
NOTE 5Trustees and Officers Fees and Benefits
Trustees and Officers Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees and Officers Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees were eligible to participate in a retirement plan that provided for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees and Officers Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 6Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period-end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 7Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended December 31, 2017 and 2016:
2017 | 2016 | |||||||
Ordinary income |
$ | 2,412,027 | $ | 713,635 | ||||
Long-term capital gain |
4,303,768 | 21,004,327 | ||||||
Total distributions |
$ | 6,715,795 | $ | 21,717,962 |
Tax Components of Net Assets at Period-End:
2017 | ||||
Undistributed ordinary income |
$ | 3,905,945 | ||
Undistributed long-term gain |
41,474,605 | |||
Net unrealized appreciation investments |
59,614,105 | |||
Temporary book/tax differences |
(56,967 | ) | ||
Shares of beneficial interest |
294,169,960 | |||
Total net assets |
$ | 399,107,648 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Funds net unrealized appreciation difference is attributable primarily to wash sales.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Funds temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund does not have a capital loss carryforward as of December 31, 2017.
Invesco V.I. American Value Fund
NOTE 8Investment Transactions
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended December 31, 2017 was $212,529,677 and $244,447,582, respectively. Cost of investments, including any derivatives, on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investments on a Tax Basis | ||||
Aggregate unrealized appreciation of investments |
$ | 69,365,863 | ||
Aggregate unrealized (depreciation) of investments |
(9,751,758 | ) | ||
Net unrealized appreciation of investments |
$ | 59,614,105 |
Cost of investments for tax purposes is $339,024,613.
NOTE 9Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of REIT distributions, on December 31, 2017, undistributed net investment income was decreased by $249,839, undistributed net realized gain was increased by $202,655 and shares of beneficial interest was increased by $47,184. This reclassification had no effect on the net assets of the Fund.
NOTE 10Share Information
Summary of Share Activity | ||||||||||||||||
Years ended December 31, | ||||||||||||||||
2017(a) | 2016 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: |
||||||||||||||||
Series I |
303,660 | $ | 5,290,582 | 465,190 | $ | 7,060,652 | ||||||||||
Series II |
3,186,094 | 54,783,210 | 5,595,826 | 89,247,325 | ||||||||||||
Issued as reinvestment of dividends: |
||||||||||||||||
Series I |
122,260 | 2,078,429 | 427,077 | 6,777,718 | ||||||||||||
Series II |
275,215 | 4,637,366 | 949,793 | 14,940,244 | ||||||||||||
Reacquired: |
||||||||||||||||
Series I |
(1,582,312 | ) | (27,610,171 | ) | (2,060,028 | ) | (33,124,847 | ) | ||||||||
Series II |
(4,078,148 | ) | (69,253,513 | ) | (3,266,703 | ) | (51,234,284 | ) | ||||||||
Net increase (decrease) in share activity |
(1,773,231 | ) | $ | (30,074,097 | ) | 2,111,155 | $ | 33,666,808 |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 60% of the outstanding shares of the Fund. The Fund and the Funds principal underwriter or adviser, are parties to participation agreements with these entities whereby these entities sell units of interest in separate accounts funding variable products that are invested in the Fund. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
Invesco V.I. American Value Fund
NOTE 11Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Net asset value, beginning of period |
Net investment income(a) |
Net gains (losses) on securities (both realized and unrealized) |
Total from investment operations |
Dividends from net investment income |
Distributions from net realized gains |
Total distributions |
Net asset value, end of period |
Total return(b) |
Net assets, end of period (000s omitted) |
Ratio
of expenses to average net assets with fee waivers and/or expenses absorbed |
Ratio of expenses to average net assets without fee waivers and/or expenses absorbed |
Ratio of net investment income to average net assets |
Portfolio turnover(c) |
|||||||||||||||||||||||||||||||||||||||||||
Series I |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/17 |
$ | 17.06 | $ | 0.08 | $ | 1.59 | $ | 1.67 | $ | (0.14 | ) | $ | (0.21 | ) | $ | (0.35 | ) | $ | 18.38 | 9.96 | % | $ | 104,510 | 0.94 | %(d) | 0.94 | %(d) | 0.48 | %(d) | 56 | % | |||||||||||||||||||||||||
Year ended 12/31/16 |
15.69 | 0.13 | 2.23 | 2.36 | (0.06 | ) | (0.93 | ) | (0.99 | ) | 17.06 | 15.49 | 116,762 | 0.97 | 0.97 | 0.84 | 50 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 |
19.92 | 0.06 | (1.82 | ) | (1.76 | ) | (0.06 | ) | (2.41 | ) | (2.47 | ) | 15.69 | (9.13 | ) | 125,686 | 0.99 | 0.99 | 0.33 | 26 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 |
19.89 | 0.07 | 1.78 | 1.85 | (0.10 | ) | (1.72 | ) | (1.82 | ) | 19.92 | 9.75 | 152,938 | 0.99 | 1.00 | 0.32 | 48 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 |
14.91 | 0.07 | 5.03 | 5.10 | (0.12 | ) | | (0.12 | ) | 19.89 | 34.27 | 156,824 | 0.99 | 1.00 | 0.39 | 42 | ||||||||||||||||||||||||||||||||||||||||
Series II |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/17 |
16.90 | 0.04 | 1.56 | 1.60 | (0.10 | ) | (0.21 | ) | (0.31 | ) | 18.19 | 9.62 | 294,598 | 1.19 | (d) | 1.19 | (d) | 0.23 | (d) | 56 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/16 |
15.55 | 0.09 | 2.21 | 2.30 | (0.02 | ) | (0.93 | ) | (0.95 | ) | 16.90 | 15.22 | 284,043 | 1.22 | 1.22 | 0.59 | 50 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 |
19.75 | 0.02 | (1.80 | ) | (1.78 | ) | (0.01 | ) | (2.41 | ) | (2.42 | ) | 15.55 | (9.36 | ) | 210,354 | 1.24 | 1.24 | 0.08 | 26 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 |
19.73 | 0.01 | 1.77 | 1.78 | (0.04 | ) | (1.72 | ) | (1.76 | ) | 19.75 | 9.48 | 270,908 | 1.24 | 1.25 | 0.07 | 48 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 |
14.81 | 0.03 | 4.99 | 5.02 | (0.10 | ) | | (0.10 | ) | 19.73 | 33.93 | 320,754 | 1.24 | 1.25 | 0.14 | 42 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year, if applicable, and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns. |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. |
(d) | Ratios are based on average daily net assets (000s omitted) of $107,242 and $280,568 for Series I and Series II shares, respectively. |
Invesco V.I. American Value Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
and Shareholders of Invesco V.I. American Value Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Invesco V.I. American Value Fund (one of the funds constituting AIM Variable Insurance Funds (Invesco Variable Insurance Funds), hereafter referred to as the Fund) as of December 31, 2017, the related statement of operations for the year ended December 31, 2017, the statement of changes in net assets for each of the two years in the period ended December 31, 2017, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2017 (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2017 and the financial highlights for each of the five years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Funds management. Our responsibility is to express an opinion on the Funds financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2017 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, TX
February 14, 2018
We have served as the auditor of one or more of the investment companies in the Invesco/PowerShares group of investment companies since at least 1995. We have not determined the specific year we began serving as auditor.
Invesco V.I. American Value Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period July 1, 2017 through December 31, 2017.
The actual and hypothetical expenses in the examples below do not represent the effect of any fees or other expenses assessed in connection with a variable product; if they did, the expenses shown would be higher while the ending account values shown would be lower.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled Actual Expenses Paid During Period to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Funds actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs. Therefore, the hypothetical information is useful in comparing ongoing costs, and will not help you determine the relative total costs of owning different funds.
Class | Beginning Account Value (07/01/17) |
ACTUAL | HYPOTHETICAL (5% annual return before |
Annualized Expense Ratio |
||||||||||||||||||||
Ending Account Value (12/31/17)1 |
Expenses Paid During Period2 |
Ending Account Value (12/31/17) |
Expenses Paid During Period2 |
|||||||||||||||||||||
Series I |
$ | 1,000.00 | $ | 1,078.70 | $ | 4.87 | $ | 1,020.52 | $ | 4.74 | 0.93 | % | ||||||||||||
Series II |
1,000.00 | 1,077.70 | 6.18 | 1,019.26 | 6.01 | 1.18 |
1 | The actual ending account value is based on the actual total return of the Fund for the period July 1, 2017 through December 31, 2017, after actual expenses and will differ from the hypothetical ending account value which is based on the Funds expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Funds annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half year. |
Invesco V.I. American Value Fund
Tax Information
Form 1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific states requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended December 31, 2017:
Federal and State Income Tax |
||||
Long-Term Capital Gain Distributions |
$ | 4,303,768 | ||
Corporate Dividends Received Deduction* |
99.99 | % | ||
U.S. Treasury Obligations* |
0.00 | % |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Funds fiscal year. |
Invesco V.I. American Value Fund
Trustees and Officers
The address of each trustee and officer is AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Trust), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trusts organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 1960 Trustee |
2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business
Formerly: Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US), Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) |
158 | None | ||||
Philip A. Taylor2 1954 Trustee and Senior Vice President |
2006 | Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco Aim Management Group, Inc.) (financial services holding company); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.) (registered transfer agent); Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company); Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management).
Formerly: Co-Chairman, Co-President and Co-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chief Executive Officer and President, Van Kampen Exchange Corp; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurers Series Trust (Invesco Treasurers Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurers Series Trust (Invesco Treasurers Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) (registered broker dealer); Manager, Invesco PowerShares Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco Aim Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurers Series Trust (Invesco Treasurers Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. |
158 | None |
1 | Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser. |
2 | Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser. |
Invesco V.I. American Value Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Independent Trustees | ||||||||
Bruce L. Crockett 1944 Trustee and Chair |
1993 | Chairman, Crockett Technologies Associates (technology consulting company)
Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute: Member of the Audit Committee, Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council |
158 | Director and Chairman of the Audit Committee, ALPS (Attorneys Liability Protection Society) (insurance company); Director and Member of the Audit Committee and Compensation Committee, Ferroglobe PLC (metallurgical company) | ||||
David C. Arch 1945 Trustee |
2010 | Chairman of Blistex Inc. (consumer health care products manufacturer); Member, World Presidents Organization | 158 | Board member of the Illinois Manufacturers Association | ||||
Jack M. Fields 1952 Trustee |
1997 | Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Chairman, Discovery Learning Alliance (non-profit)
Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff) (human resources provider); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives |
158 | None | ||||
Cynthia Hostetler 1962 Trustee |
2017 | Non-Executive Director and Trustee of a number of public and private business corporations
Formerly: Head of Investment Funds and Private Equity, Overseas Private Investment Corporation; President, First Manhattan Bancorporation, Inc.; Attorney, Simpson Thacher & Bartlett LLP |
158 | Vulcan Materials Company (construction materials company); Trilinc Global Impact Fund; Aberdeen Investment Funds (4 portfolios); Artio Global Investment LLC (mutual fund complex); Edgen Group, Inc. (specialized energy and infrastructure products distributor) | ||||
Eli Jones 1961 Trustee |
2016 | Professor and Dean, Mays Business School Texas A&M University
Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University; Director, Arvest Bank |
158 | Insperity, Inc. (formerly known as Administaff) (human resources provider) | ||||
Prema Mathai-Davis 1950 Trustee |
1998 | Retired. | 158 | None | ||||
Teresa M. Ressel 1962 Trustee |
2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Chief Financial Officer, Olayan America, The Olayan Group (international investor/commercial/industrial); Chief Executive Officer, UBS Securities LLC; Group Chief Operating Officer, Americas, UBS AG; Assistant Secretary for Management & Budget and CFO, US Department of the Treasury |
158 | Atlantic Power Corporation (power generation company); ON Semiconductor Corp. (semiconductor supplier) | ||||
Ann Barnett Stern 1957 Trustee |
2017 | President and Chief Executive Officer, Houston Endowment Inc. (private philanthropic institution)
Formerly: Executive Vice President and General Counsel, Texas Childrens Hospital; Attorney, Beck, Redden and Secrest, LLP; Business Law Instructor, University of St. Thomas; Attorney, Andrews & Kurth LLP |
158 | Federal Reserve Bank of Dallas | ||||
Raymond Stickel, Jr. 1944 Trustee |
2005 | Retired.
Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios); Partner, Deloitte & Touche |
158 | None | ||||
Robert C. Troccoli 1949 Trustee |
2016 | Adjunct Professor, University of Denver Daniels College of Business
Formerly: Senior Partner, KPMG LLP |
158 | None | ||||
Christopher L. Wilson 1957 Trustee |
2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Managing Partner, CT2, LLC (investing and consulting firm); President/Chief Executive Officer, Columbia Funds, Bank of America Corporation; President/Chief Executive Officer, CDC IXIS Asset Management Services, Inc.; Principal & Director of Operations, Scudder Funds, Scudder, Stevens & Clark, Inc.; Assistant Vice President, Fidelity Investments |
158 | TD Asset Management USA Inc. (mutual fund complex) (22 portfolios); ISO New England, Inc. (non-profit organization managing regional electricity market) |
Invesco V.I. American Value Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers | ||||||||
Sheri Morris 1964 President, Principal Executive Officer and Treasurer |
1999 | President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco Aim Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; and Treasurer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust and PowerShares Actively Managed Exchange-Traded Fund Trust |
N/A | N/A | ||||
Russell C. Burk 1958 Senior Vice President and Senior Officer |
2005 | Senior Vice President and Senior Officer, The Invesco Funds | N/A | N/A | ||||
John M. Zerr 1962 Senior Vice President, Chief Legal Officer and Secretary |
2006 | Director, Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Managing Director, Invesco PowerShares Capital Management LLC; Director, Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust; Manager and Secretary, Invesco Indexing LLC
Formerly: Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser); Vice President and Secretary, PBHG Funds (an investment company) and PBHG Insurance Series Fund (an investment company); Chief Operating Officer, General Counsel and Secretary, Old Mutual Investment Partners (a broker-dealer); General Counsel and Secretary, Old Mutual Fund Services (an administrator) and Old Mutual Shareholder Services (a shareholder servicing center); Executive Vice President, General Counsel and Secretary, Old Mutual Capital, Inc. (an investment adviser); and Vice President and Secretary, Old Mutual Advisors Funds (an investment company) |
N/A | N/A | ||||
Gregory G. McGreevey 1962 Senior Vice President |
2012 | Senior Managing Director, Invesco Ltd.; Director, Chairman, President, and Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President, Invesco Management Group, Inc.; Director, Invesco Mortgage Capital, Inc. and Invesco Senior Secured Management, Inc.; and Senior Vice President, The Invesco Funds
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A | ||||
Kelli Gallegos 1970 Vice President, Principal Financial Officer and Assistant Treasurer |
2008 | Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A |
Invesco V.I. American Value Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers(continued) | ||||||||
Tracy Sullivan 1962 Vice President, Chief Tax Officer and Assistant Treasurer |
2008 | Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A | ||||
Crissie M. Wisdom 1969 Anti-Money Laundering Compliance Officer |
2013 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., Invesco Management Group, Inc., The Invesco Funds, and PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp. |
N/A | N/A | ||||
Robert R. Leveille 1969 Chief Compliance Officer |
2016 | Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds
Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds |
N/A | N/A |
The Statement of Additional Information of the Trust includes additional information about the Funds Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Funds Statement of Additional Information for information on the Funds sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 |
Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Auditors PricewaterhouseCoopers LLP 1000 Louisiana Street, Suite 5800 Houston, TX 77002-5678 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2005 Market Street, Suite 2600 Philadelphia, PA 19103-7018 |
Counsel to the Independent Trustees Goodwin Procter LLP 901 New York Avenue, N.W. Washington, D.C. 20001 |
Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
Invesco V.I. American Value Fund
| ||||
Annual Report to Shareholders
|
December 31, 2017 | |||
| ||||
Invesco V.I. Balanced-Risk Allocation Fund
|
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Funds semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The Funds Form N-Q filings are available on the SEC website, sec.gov. Copies of the Funds Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-07452 and 033-57340. The Funds most recent portfolio holdings, as filed on Form N-Q, have also been made available to insurance companies issuing variable annuity contracts and variable life insurance policies (variable products) that invest in the Fund. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/ proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
This report must be accompanied or preceded by a currently effective Fund prospectus and variable product prospectus, which contain more complete information, including sales charges and expenses. Investors should read each carefully before investing.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
Invesco Distributors, Inc. VIIBRA-AR-1 02142018 1346 |
Managements Discussion of Fund Performance
Invesco V.I. Balanced-Risk Allocation Fund
Invesco V.I. Balanced-Risk Allocation Fund
Your Funds Long-Term Performance
Results of a $10,000 Investment Oldest Share Class(es) since Inception
Fund and index data from 1/23/09
1 | Source: FactSet Research Systems Inc. |
2 | Source(s): Invesco, FactSet Research Systems Inc. |
Past performance cannot guarantee comparable future results.
Due to changes within the Lipper VUF Absolute Returns Funds Classification Average, certain components do not have 10 years of historical data. As such, the benchmark has not been included within the chart above.
Invesco V.I. Balanced-Risk Allocation Fund
Invesco V.I. Balanced-Risk Allocation Funds investment objective is total return with a low to moderate correlation to traditional financial market indices.
∎ | Unless otherwise stated, information presented in this report is as of December 31, 2017, and is based on total net assets. |
∎ | Unless otherwise noted, all data provided by Invesco. |
Invesco V.I. Balanced-Risk Allocation Fund
Invesco V.I. Balanced-Risk Allocation Fund
Invesco V.I. Balanced-Risk Allocation Fund
Consolidated Schedule of Investments
December 31, 2017
Interest Rate |
Maturity Date |
Principal Amount |
Value | |||||||||||||
U.S. Treasury Bills10.96%(a) |
| |||||||||||||||
U.S. Treasury Bills(b) |
1.12 | % | 01/04/2018 | $ | 15,500,000 | $ | 15,499,028 | |||||||||
U.S. Treasury Bills(b) |
1.02 | % | 01/11/2018 | 47,200,000 | 47,186,166 | |||||||||||
U.S. Treasury Bills |
1.11 | % | 02/08/2018 | 14,980,000 | 14,960,812 | |||||||||||
U.S. Treasury Bills |
1.44 | % | 06/07/2018 | 54,000,000 | 53,657,775 | |||||||||||
Total U.S. Treasury Bills (Cost $131,309,526) |
131,303,781 | |||||||||||||||
Expiration Date |
||||||||||||||||
Commodity-Linked Securities2.00% |
||||||||||||||||
Canadian Imperial Bank of Commerce EMTN, U.S. Federal Funds Effective Rate minus 0.03% (linked to the Canadian Imperial Bank of Commerce Custom 5 Agriculture Commodity Index, multiplied by 2)(c)(g) |
09/24/2018 | 8,850,000 | 9,611,802 | |||||||||||||
Cargill, Inc., Commodity-Linked Notes, one month USD LIBOR minus 0.10% (linked to the Monthly Rebalance Commodity Excess Return Index, multiplied by 2)(c)(g) |
08/15/2018 | 15,050,000 | 14,307,158 | |||||||||||||
Total Commodity-Linked Securities (Cost $23,900,000) |
23,918,960 | |||||||||||||||
Shares | ||||||||||||||||
Money Market Funds83.92% |
||||||||||||||||
Invesco Government & Agency PortfolioInstitutional Class, 1.18%(d) |
357,347,280 | 357,347,280 | ||||||||||||||
Invesco Government Money Market FundCash Reserve Shares, 0.64%(d) |
11,260,610 | 11,260,610 | ||||||||||||||
Invesco Premier U.S. Government Money PortfolioInstitutional Class, 1.15%(d) |
124,910,149 | 124,910,149 | ||||||||||||||
Invesco Treasury Obligations PortfolioInstitutional Class, 1.07%(d) |
186,855,744 | 186,855,744 | ||||||||||||||
Invesco Treasury PortfolioInstitutional Class, 1.17%(d) |
229,511,825 | 229,511,825 | ||||||||||||||
Invesco V.I. Government Money Market FundSeries I, 0.90%(d) |
16,640,310 | 16,640,310 | ||||||||||||||
STIC (Global Series) PLCU.S. Dollar Liquidity PortfolioInstitutional Class (Ireland), 1.39%(d) |
78,367,910 | 78,367,910 | ||||||||||||||
Total Money Market Funds (Cost $1,004,893,828) |
1,004,893,828 | |||||||||||||||
TOTAL INVESTMENTS IN SECURITIES96.88% (Cost $1,160,103,354) |
1,160,116,569 | |||||||||||||||
OTHER ASSETS LESS LIABILITIES3.12% |
37,300,376 | |||||||||||||||
NET ASSETS100.00% |
$ | 1,197,416,945 |
Open Futures Contracts(e) | ||||||||||||||||||||
Long Futures Contracts | Number of Contracts |
Expiration Month |
Notional Value |
Value | Unrealized Appreciation (Depreciation) |
|||||||||||||||
Brent Crude |
333 | March-2018 | $ | 22,267,710 | $ | 1,033,582 | $ | 1,033,582 | ||||||||||||
Gasoline Reformulated Blendstock Oxygenate Blending |
470 | February-2018 | 35,449,092 | 2,235,837 | 2,235,837 | |||||||||||||||
Heating Oil |
169 | April-2018 | 14,292,533 | 2,074,091 | 2,074,091 | |||||||||||||||
Silver |
371 | March-2018 | 31,803,975 | (96,852 | ) | (96,852 | ) | |||||||||||||
WTI Crude |
263 | June-2018 | 15,795,780 | 626,274 | 626,274 | |||||||||||||||
Subtotal Commodity Risk |
|
5,872,932 | 5,872,932 | |||||||||||||||||
Dow Jones EURO STOXX 50 Index |
2,085 | March-2018 | 87,380,294 | (2,208,417 | ) | (2,208,417 | ) | |||||||||||||
E-Mini Russell 2000 Index |
883 | March-2018 | 67,836,475 | 868,245 | 868,245 | |||||||||||||||
E-Mini S&P 500 Index |
528 | March-2018 | 70,646,400 | 1,176,670 | 1,176,670 | |||||||||||||||
FTSE 100 Index |
920 | March-2018 | 94,870,987 | 2,969,523 | 2,969,523 | |||||||||||||||
Hang Seng Index |
388 | January-2018 | 74,363,066 | 1,154,573 | 1,154,573 | |||||||||||||||
Tokyo Stock Price Index |
626 | March-2018 | 100,953,404 | 2,426,419 | 2,426,419 | |||||||||||||||
Subtotal Equity Risk |
|
6,387,013 | 6,387,013 | |||||||||||||||||
Australia 10 Year Bonds |
1,615 | March-2018 | 162,741,962 | (1,170,994 | ) | (1,170,994 | ) | |||||||||||||
Canada 10 Year Bonds |
2,120 | March-2018 | 227,332,007 | (3,002,411 | ) | (3,002,411 | ) | |||||||||||||
Euro Bonds |
545 | March-2018 | 105,721,097 | (951,857 | ) | (951,857 | ) | |||||||||||||
Long Gilt |
746 | March-2018 | 126,057,973 | 854,542 | 854,542 | |||||||||||||||
U.S. Treasury Long Bonds |
711 | March-2018 | 108,783,000 | (160,637 | ) | (160,637 | ) | |||||||||||||
Subtotal Interest Rate Risk |
|
(4,431,357 | ) | (4,431,357 | ) | |||||||||||||||
Total Futures Contracts |
|
$ | 7,828,588 | $ | 7,828,588 |
See accompanying Notes to Consolidated Financial Statements which are an integral part of the financial statements.
Invesco V.I. Balanced-Risk Allocation Fund
Open Over-The-Counter Total Return Swap Agreements(f) | ||||||||||||||||||||||||||||||||||||||
Counterparty | Pay/ Receive |
Reference Entity(g) | Fixed Rate |
Payment Frequency |
Number of Contracts |
Maturity Date |
Notional Value(h) |
Upfront Payments Paid (Received) |
Value | Unrealized Appreciation (Depreciation) |
||||||||||||||||||||||||||||
Barclays Bank PLC |
Receive | Barclays Commodity Strategy 1452 Excess Return Index | 0.33 | % | Monthly | 43,000 | October-2018 | $ | 24,188,402 | $ | | $ | 1,280,009 | $ | 1,280,009 | |||||||||||||||||||||||
Barclays Bank PLC |
Receive | Barclays Commodity Strategy 1719 Excess Return Index | 0.45 | Monthly | 107,400 | July-2018 | 27,289,470 | | 653,164 | 653,164 | ||||||||||||||||||||||||||||
Canadian Imperial Bank of Commerce |
Receive | Canadian Imperial Bank of Commerce Custom 5 Agriculture Commodity Index | 0.55 | Monthly | 310,500 | July-2018 | 28,789,560 | | 598,427 | 598,427 | ||||||||||||||||||||||||||||
Canadian Imperial Bank of Commerce |
Receive | Canadian Imperial Bank of Commerce Dynamic Roll LME Copper Excess Return Index 2 | 0.30 | Monthly | 278,500 | April-2018 | 23,410,292 | | 2,030,822 | 2,030,822 | ||||||||||||||||||||||||||||
Cargill, Inc. |
Receive | Monthly Rebalance Commodity Excess Return Index | 0.47 | Monthly | 37,200 | July-2018 | 30,776,416 | | 0 | 0 | ||||||||||||||||||||||||||||
Cargill, Inc. |
Receive | Single Commodity Index Excess Return | 0.12 | Monthly | 13,800 | January-2018 | 12,520,850 | | 0 | 0 | ||||||||||||||||||||||||||||
Goldman Sachs International |
Receive | Goldman Sachs Alpha Basket B823 Excess Return Strategy | 0.40 | Monthly | 339,500 | July-2018 | 27,811,742 | | 114,245 | 114,245 | ||||||||||||||||||||||||||||
J.P. Morgan Chase Bank, N.A. |
Receive | J.P. Morgan Contag Beta Gas Oil Excess Return Index | 0.25 | Monthly | 63,300 | April-2018 | 15,071,008 | | 498,823 | 498,823 | ||||||||||||||||||||||||||||
J.P. Morgan Chase Bank, N.A. |
Receive | S&P GSCI Gold Index Excess Return | 0.09 | Monthly | 161,500 | October-2018 | 16,761,100 | | 399,761 | 399,761 | ||||||||||||||||||||||||||||
Macquarie Bank Ltd. |
Receive | Macquarie Aluminum Dynamic Selection Index | 0.30 | Monthly | 192,000 | December-2018 | 10,892,544 | | 832,704 | 832,704 | ||||||||||||||||||||||||||||
Merrill Lynch International |
Receive | Merrill Lynch Gold Excess Return Index | 0.14 | Monthly | 129,000 | June-2018 | 21,482,344 | | 0 | 0 | ||||||||||||||||||||||||||||
Merrill Lynch International |
Receive | MLCX Aluminum Annual Excess Return Index | 0.28 | Monthly | 15,000 | September-2018 | 1,881,231 | | 0 | 0 | ||||||||||||||||||||||||||||
Merrill Lynch International |
Receive | MLCX Dynamic Enhanced Copper Excess Return Index | 0.25 | Monthly | 2,300 | September-2018 | 1,615,076 | | 0 | 0 | ||||||||||||||||||||||||||||
Merrill Lynch International |
Receive | MLCX Natural Gas Annual Excess Return Index | 0.25 | Monthly | 217,000 | November-2018 | 9,232,154 | | 0 | 0 | ||||||||||||||||||||||||||||
Morgan Stanley Capital Services LLC |
Receive | S&P GSCI Aluminum Dynamic Roll Index Excess Return | 0.38 | Monthly | 149,500 | October-2018 | 16,972,047 | | 1,449,522 | 1,449,522 | ||||||||||||||||||||||||||||
Subtotal Commodity Risk |
|
| 7,857,477 | 7,857,477 | ||||||||||||||||||||||||||||||||||
Goldman Sachs International |
Receive | Hang Seng Index Futures | | Monthly | 106 | January-2018 | 20,315,683 | | 333,716 | 333,716 | ||||||||||||||||||||||||||||
Subtotal Equity Risk |
|
| 333,716 | 333,716 | ||||||||||||||||||||||||||||||||||
Subtotal Appreciation |
|
| 8,191,193 | 8,191,193 | ||||||||||||||||||||||||||||||||||
Macquarie Bank Ltd. |
Receive | Macquarie CGB 10 Year Index | 0.34 | Monthly | 107,000 | June-2018 | CAD 19,108,049 | | (74,084 | ) | (74,084 | ) | ||||||||||||||||||||||||||
Subtotal Depreciation Interest Rate Risk |
|
| (74,084 | ) | (74,084 | ) | ||||||||||||||||||||||||||||||||
Total Swap Agreements |
|
$ | | $ | 8,117,109 | $ | 8,117,109 |
Investments Abbreviations:
Notes to Consolidated Schedule of Investments:
(a) | Securities traded on a discount basis. The interest rates shown represent the discount rates at the time of purchase by the Fund. |
(b) | All or a portion of the value was pledged as collateral to cover margin requirements for open futures contracts. See Note 1L and Note 4. |
(c) | Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended (the 1933 Act). The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The aggregate value of these securities at December 31, 2017, was $23,918,960, which represented 2.00% of the Funds Net Assets. |
(d) | The money market fund and the Fund are affiliated by having the same investment adviser. The rate shown is the 7-day SEC standardized yield as of December 31, 2017. |
(e) | Futures contracts collateralized by $9,191,000 cash held with Goldman Sachs & Co., the futures commission merchant. |
(f) | The Fund receives or pays payments based on any positive or negative return on the Reference Entity, respectively. |
(g) | The table below includes additional information regarding the underlying components of certain reference entities that are not publicly available. |
See accompanying Notes to Consolidated Financial Statements which are an integral part of the financial statements.
Invesco V.I. Balanced-Risk Allocation Fund
Reference Entity Components | ||||||
Reference Entity | Underlying Components | Percentage | ||||
Barclays Commodity Strategy 1452 Excess Return Index | ||||||
Long Futures Contracts | ||||||
Copper | 100.00 | |||||
Barclays Commodity Strategy 1719 Excess Return Index | ||||||
Long Futures Contracts | ||||||
Cocoa | 0.17 | |||||
Coffee C | 5.28 | |||||
Corn | 7.70 | |||||
Cotton No. 2 | 18.88 | |||||
Lean Hogs | 0.52 | |||||
Live Cattle | 1.24 | |||||
Soybean Meal | 18.81 | |||||
Soybean Oil | 4.79 | |||||
Soybeans | 18.38 | |||||
Sugar No. 11 | 19.42 | |||||
Wheat | 4.81 | |||||
Total | 100.00 | |||||
Canadian Imperial Bank of Commerce Custom 5 Agriculture Commodity Index |
||||||
Long Futures Contracts | ||||||
Cocoa | 0.17 | |||||
Coffee C | 5.28 | |||||
Corn | 7.70 | |||||
Cotton No. 2 | 18.88 | |||||
Lean Hogs | 0.52 | |||||
Live Cattle | 1.24 | |||||
Soybean Meal | 18.81 | |||||
Soybean Oil | 4.79 | |||||
Soybeans | 18.38 | |||||
Sugar No. 11 | 19.42 | |||||
Wheat | 4.81 | |||||
Total | 100.00 | |||||
Canadian Imperial Bank of Commerce Dynamic Roll LME Copper Excess Return Index 2 |
||||||
Long Futures Contracts | ||||||
Copper | 100.00 | |||||
Monthly Rebalance Commodity Excess Return Index | ||||||
Long Futures Contracts | ||||||
Cocoa | 0.17 | |||||
Coffee C | 5.28 | |||||
Corn | 7.70 | |||||
Cotton No. 2 | 18.88 | |||||
Lean Hogs | 0.52 | |||||
Live Cattle | 1.24 | |||||
Soybean Meal | 18.81 | |||||
Soybean Oil | 4.79 | |||||
Soybeans | 18.38 | |||||
Sugar No. 11 | 19.42 | |||||
Wheat | 4.81 | |||||
Total | 100.00 | |||||
Single Commodity Index Excess Return | ||||||
Long Futures Contracts | ||||||
Gold | 100.00 |
See accompanying Notes to Consolidated Financial Statements which are an integral part of the financial statements.
Invesco V.I. Balanced-Risk Allocation Fund
Reference Entity Components (Continued) | ||||||
Reference Entity | Underlying Components | Percentage | ||||
Goldman Sachs Alpha Basket B823 Excess Return Strategy | ||||||
Long Futures Contracts | ||||||
Cocoa | 0.17 | |||||
Coffee C | 5.28 | |||||
Corn | 7.70 | |||||
Cotton No. 2 | 18.88 | |||||
Lean Hogs | 0.52 | |||||
Live Cattle | 1.24 | |||||
Soybean Meal | 18.81 | |||||
Soybean Oil | 4.79 | |||||
Soybeans | 18.38 | |||||
Sugar No. 11 | 19.42 | |||||
Wheat | 4.81 | |||||
Total | 100.00 | |||||
J.P. Morgan Contag Beta Gas Oil Excess Return Index | ||||||
Long Futures Contracts | ||||||
Gas Oil | 100.00 | |||||
S&P GSCI Gold Index Excess Return | ||||||
Long Futures Contracts | ||||||
Gold | 100.00 | |||||
Macquarie Aluminum Dynamic Selection Index | ||||||
Long Futures Contracts | ||||||
Aluminum | 100.00 | |||||
Merrill Lynch Gold Excess Return Index | ||||||
Long Futures Contracts | ||||||
Gold | 100.00 | |||||
MLCX Aluminum Annual Excess Return Index | ||||||
Long Futures Contracts | ||||||
Aluminum | 100.00 | |||||
MLCX Dynamic Enhanced Copper Excess Return Index | ||||||
Long Futures Contracts | ||||||
Copper | 100.00 | |||||
MLCX Natural Gas Annual Excess Return Index | ||||||
Long Futures Contracts | ||||||
Natural Gas | 100.00 | |||||
S&P GSCI Aluminum Dynamic Roll Index Excess Return | ||||||
Long Futures Contracts | ||||||
Aluminum | 100.00 | |||||
Macquarie CGB 10 Year Index | ||||||
Long Futures Contracts | ||||||
Canada 10 Year Bonds | 100.00 |
(h) | Notional value is denominated in U.S. Dollars unless otherwise noted. |
See accompanying Notes to Consolidated Financial Statements which are an integral part of the financial statements.
Invesco V.I. Balanced-Risk Allocation Fund
See accompanying Notes to Consolidated Financial Statements which are an integral part of the financial statements.
Invesco V.I. Balanced-Risk Allocation Fund
Consolidated Statement of Changes in Net Assets
For the years ended December 31, 2017 and 2016
2017 | 2016 | |||||||
Operations: |
||||||||
Net investment income (loss) |
$ | (1,675,961 | ) | $ | (5,966,345 | ) | ||
Net realized gain |
101,494,421 | 110,140,284 | ||||||
Change in net unrealized appreciation |
10,795,576 | 5,010,818 | ||||||
Net increase in net assets resulting from operations |
110,614,036 | 109,184,757 | ||||||
Distributions to shareholders from net investment income: |
||||||||
Series I |
(1,508,787 | ) | (141,115 | ) | ||||
Series ll |
(43,695,120 | ) | (1,965,605 | ) | ||||
Total distributions from net investment income |
(45,203,907 | ) | (2,106,720 | ) | ||||
Distributions to shareholders from net realized gains: |
||||||||
Series l |
(2,046,037 | ) | | |||||
Series ll |
(62,678,695 | ) | | |||||
Total distributions from net realized gains |
(64,724,732 | ) | | |||||
Share transactionsnet: |
||||||||
Series l |
4,606,109 | 4,731,130 | ||||||
Series ll |
43,872,788 | 70,235,119 | ||||||
Net increase in net assets resulting from share transactions |
48,478,897 | 74,966,249 | ||||||
Net increase in net assets |
49,164,294 | 182,044,286 | ||||||
Net assets: |
||||||||
Beginning of year |
1,148,252,651 | 966,208,365 | ||||||
End of year (includes undistributed net investment income of $6,690,148 and $46,947,454, respectively) |
$ | 1,197,416,945 | $ | 1,148,252,651 |
Notes to Consolidated Financial Statements
December 31, 2017
NOTE 1Significant Accounting Policies
Invesco V.I. Balanced-Risk Allocation Fund (the Fund) is a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Trust). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end series management investment company consisting of twenty-four separate portfolios, (each constituting a Fund). The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these consolidated financial statements pertains only to the Fund. Matters affecting each Fund or class will be voted on exclusively by the shareholders of such Fund or class. Current Securities and Exchange Commission (SEC) guidance, however, requires participating insurance companies offering separate accounts to vote shares proportionally in accordance with the instructions of the contract owners whose investments are funded by shares of each Fund or class.
The Fund will seek to gain exposure to the commodity markets primarily through investments in the Invesco Cayman Commodity Fund IV Ltd. (the Subsidiary), a wholly-owned subsidiary of the Fund organized under the laws of the Cayman Islands. The Subsidiary was organized by the Fund to invest in commodity-linked derivatives and other securities that may provide leveraged and non-leveraged exposure to commodities. The Fund may invest up to 25% of its total assets in the Subsidiary.
The Funds investment objective is total return with a low to moderate correlation to traditional financial market indices.
The Fund currently offers two classes of shares, Series I and Series II, both of which are offered to insurance company separate accounts funding variable annuity contracts and variable life insurance policies (variable products).
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946, Financial Services Investment Companies.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its consolidated financial statements.
A. | Security Valuations Securities, including restricted securities, are valued according to the following policy. |
Debt obligations (including convertible securities) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual trading characteristics and other market data. Pricing services generally value debt obligations assuming orderly transactions of institutional round lot size, but a fund may hold or transact in the same securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Invesco V.I. Balanced-Risk Allocation Fund
A security listed or traded on an exchange (except convertible securities) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and asked prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and asked prices. For purposes of determining net asset value (NAV) per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (NYSE).
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end-of-day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
Swap agreements are fair valued using an evaluated quote, if available, provided by an independent pricing service. Evaluated quotes provided by the pricing service are valued based on a model which may include end-of-day net present values, spreads, ratings, industry, company performance and returns of referenced assets. Centrally cleared swap agreements are valued at the daily settlement price determined by the relevant exchange or clearinghouse.
Foreign securities (including foreign exchange contracts) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that the investment adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trusts officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/asked quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a securitys fair value.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuers assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the consolidated financial statements may materially differ from the value received upon actual sale of those investments.
B. | Securities Transactions and Investment Income Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any) is recorded on the accrual basis from settlement date. Bond premiums and discounts are amortized and/or accreted over the lives of the respective securities. Pay-in-kind interest income and non-cash dividend income received in the form of securities in-lieu of cash are recorded at the fair value of the securities received. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Consolidated Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Consolidated Statement of Operations and the Consolidated Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Funds net asset value and, accordingly, they reduce the Funds total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Consolidated Statement of Operations and the Consolidated Statement of Changes in Net Assets, or the net investment income per share and the ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. | Country Determination For the purposes of making investment selection decisions and presentation in the Consolidated Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in |
Invesco V.I. Balanced-Risk Allocation Fund
which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuers securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
D. | Distributions Distributions from net investment income and net realized capital gain, if any, are generally declared and paid to separate accounts of participating insurance companies annually and recorded on the ex-dividend date. |
E. | Federal Income Taxes The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the Internal Revenue Code), necessary to qualify as a regulated investment company and to distribute substantially all of the Funds taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the consolidated financial statements. |
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Funds uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
The Subsidiary is classified as a controlled foreign corporation under Subchapter N of the Internal Revenue Code. Therefore, the Fund is required to increase its taxable income by its share of the Subsidiarys income. Net investment losses of the Subsidiary cannot be deducted by the Fund in the current period nor carried forward to offset taxable income in future periods.
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
F. | Expenses Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
G. | Accounting Estimates The financial statements are prepared on a consolidated basis in conformity with accounting principles generally accepted in the United States of America (GAAP), which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. The accompanying financial statements reflect the financial position of the Fund and its Subsidiary and the results of operations on a consolidated basis. All inter-company accounts and transactions have been eliminated in consolidation. |
In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the consolidated financial statements are released to print.
H. | Indemnifications Under the Trusts organizational documents, each Trustee, officer, employee or other agent of the Trust, and under the Subsidiarys organizational documents, the directors and officers of the Subsidiary, are indemnified against certain liabilities that may arise out of the performance of their duties to the Fund and/or the Subsidiary, respectively. Additionally, in the normal course of business, the Fund enters into contracts, including the Funds servicing agreements, that contain a variety of indemnification clauses. The Funds maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
I. | Foreign Currency Translations Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Consolidated Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Funds books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. |
The Fund may invest in foreign securities, which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests and are shown in the Consolidated Statement of Operations.
J. | Forward Foreign Currency Contracts The Fund may engage in foreign currency transactions either on a spot (i.e. for prompt delivery and settlement) basis, or through forward foreign currency contracts, to manage or minimize currency or exchange rate risk. |
The Fund may also enter into forward foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to lock in the U.S. dollar price of that security, or the Fund may also enter into forward foreign currency contracts that do not provide for physical settlement of the two currencies, but instead are settled by a single cash payment calculated as the difference between the agreed upon exchange rate and the spot rate at settlement based upon an agreed upon notional amount (non-deliverable forwards). The Fund will set aside liquid assets in an amount equal to the daily mark-to-market obligation for forward foreign currency contracts.
A forward foreign currency contract is an obligation between two parties (Counterparties) to purchase or sell a specific currency for an agreed-upon price at a future date. The use of forward foreign currency contracts does not eliminate fluctuations in the price of the underlying securities the Fund owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Consolidated Statement of Operations. The primary risks associated with forward foreign currency contracts include
Invesco V.I. Balanced-Risk Allocation Fund
failure of the Counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Consolidated Statement of Assets and Liabilities.
K. | Structured Securities The Fund may invest in structured securities. Structured securities are a type of derivative security whose value is determined by reference to changes in the value of underlying securities, currencies, interest rates, commodities, indices or other financial indicators (reference instruments). Most structured securities are fixed-income securities that have maturities of three years or less. Structured securities may be positively or negatively indexed (i.e., their principal value or interest rates may increase or decrease if the underlying reference instrument appreciates) and may have return characteristics similar to direct investments in the underlying reference instrument. |
Structured securities may entail a greater degree of market risk than other types of debt securities because the investor bears the risk of the reference instruments. In addition to the credit risk of structured securities and the normal risks of price changes in response to changes in interest rates, the principal amount of structured notes or indexed securities may decrease as a result of changes in the value of the underlying reference instruments. Changes in the daily value of structured securities are recorded as unrealized gains (losses) in the Consolidated Statement of Operations. When the structured securities mature or are sold, the Fund recognizes a realized gain (loss) on the Consolidated Statement of Operations.
L. | Futures Contracts The Fund may enter into futures contracts to equitize the Funds cash holdings or to manage exposure to interest rate, equity, commodity and market price movements and/or currency risks. A futures contract is an agreement between Counterparties to purchase or sell a specified underlying security, currency or commodity (or delivery of a cash settlement price, in the case of an index future) for a fixed price at a future date. The Fund currently invests only in exchange-traded futures and they are standardized as to maturity date and underlying financial instrument. Initial margin deposits required upon entering into futures contracts are satisfied by the segregation of specific securities or cash as collateral at the futures commission merchant (broker). During the period the futures contracts are open, changes in the value of the contracts are recognized as unrealized gains or losses by recalculating the value of the contracts on a daily basis. Subsequent or variation margin payments are received or made depending upon whether unrealized gains or losses are incurred. These amounts are reflected as receivables or payables on the Consolidated Statement of Assets and Liabilities. When the contracts are closed or expire, the Fund recognizes a realized gain or loss equal to the difference between the proceeds from, or cost of, the closing transaction and the Funds basis in the contract. The net realized gain (loss) and the change in unrealized gain (loss) on futures contracts held during the period is included on the Consolidated Statement of Operations. The primary risks associated with futures contracts are market risk and the absence of a liquid secondary market. If the Fund were unable to liquidate a futures contract and/or enter into an offsetting closing transaction, the Fund would continue to be subject to market risk with respect to the value of the contracts and continue to be required to maintain the margin deposits on the futures contracts. Futures contracts have minimal Counterparty risk since the exchanges clearinghouse, as Counterparty to all exchange-traded futures, guarantees the futures against default. Risks may exceed amounts recognized in the Consolidated Statement of Assets and Liabilities. |
M. | Swap Agreements The Fund may enter into various swap transactions, including interest rate, total return, index, currency, commodity and credit default swap contracts (CDS) for investment purposes or to manage interest rate, currency or credit risk. Such transactions are agreements between Counterparties. These agreements may contain among other conditions, events of default and termination events, and various covenants and representations such as provisions that require the Fund to maintain a pre-determined level of net assets, and/or provide limits regarding the decline of the Funds NAV over specific periods of time. If the Fund were to trigger such provisions and have open derivative positions at that time, the Counterparty may be able to terminate such agreement and request immediate payment in an amount equal to the net liability positions, if any. |
Interest rate, total return, index, and currency swap agreements are two-party contracts entered into primarily to exchange the returns (or differentials in rates of returns) earned or realized on particular predetermined investments or instruments. The gross returns to be exchanged or swapped between the parties are calculated with respect to a notional amount, i.e., the return on or increase in value of a particular dollar amount invested at a particular interest rate or return of an underlying asset, in a particular foreign currency, or in a basket of securities representing a particular index.
An interest rate swap is an agreement between Counterparties pursuant to which the parties exchange a floating rate payment for a fixed rate payment based on a specified notional amount.
A total return swap is an agreement in which one party makes payments based on a set rate, either fixed or variable, while the other party makes payments based on the return of an underlying asset, which includes both the income generated and capital gains, if any. The unrealized appreciation (depreciation) on total return swaps includes dividends on the underlying securities and financing rate payable from the Counterparty. At the maturity date, a net cash flow is exchanged where the total return is equivalent to the return of the underlying reference less a financing rate, if any. As a receiver, the Fund would receive payments based on any positive total return and would owe payments in the event of a negative total return. As the payer, the Fund would owe payments on any net positive total return, and would receive payment in the event of a negative total return.
Changes in the value of swap agreements are recognized as unrealized gains (losses) in the Consolidated Statement of Operations by marking to market on a daily basis to reflect the value of the swap agreement at the end of each trading day. Payments received or paid at the beginning of the agreement are reflected as such on the Consolidated Statement of Assets and Liabilities and may be referred to as upfront payments. The Fund accrues for the fixed payment stream and amortizes upfront payments, if any, on swap agreements on a daily basis with the net amount, recorded as a component of realized gain (loss) on the Consolidated Statement of Operations. A liquidation payment received or made at the termination of a swap agreement is recorded as realized gain (loss) on the Consolidated Statement of Operations. The Fund segregates cash or liquid securities having a value at least equal to the amount of the potential obligation of a Fund under any swap transaction. Cash held as collateral is recorded as deposits with brokers on the Consolidated Statement of Assets and Liabilities. Entering into these agreements involves, to varying degrees, lack of liquidity and elements of credit, market, and Counterparty risk in excess of amounts recognized on the Consolidated Statement of Assets and Liabilities. Such risks involve the possibility that a swap is difficult to sell or liquidate; the Counterparty does not honor its obligations under the agreement and unfavorable interest rates and market fluctuations. It is possible that developments in the swaps market, including potential government regulation, could adversely affect the Funds ability to terminate existing swap agreements or to realize amounts to be received under such agreements. A short position in a security poses more risk than holding the same security long. As there is no limit on how much the price of the security can increase, the Funds exposure is unlimited.
Invesco V.I. Balanced-Risk Allocation Fund
N. | Leverage Risk Leverage exists when the Fund can lose more than it originally invests because it purchases or sells an instrument or enters into a transaction without investing an amount equal to the full economic exposure of the instrument or transaction. |
O. | Other Risks The Fund will seek to gain exposure to commodity markets primarily through an investment in the Subsidiary and through investments in exchange-traded funds and commodity-linked derivatives. The Subsidiary, unlike the Fund, may invest without limitation in commodities, commodity-linked derivatives and other securities, such as exchange-traded and commodity-linked notes, that may provide leveraged and non-leveraged exposure to commodity markets. The Fund is indirectly exposed to the risks associated with the Subsidiarys investments. |
P. | Collateral To the extent the Fund has designated or segregated a security as collateral and that security is subsequently sold, it is the Funds practice to replace such collateral no later than the next business day. |
NOTE 2Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the Adviser or Invesco). Under the terms of the investment advisory agreement, the Fund accrues daily and pays monthly an advisory fee to the Adviser less the amount paid by the Subsidiary to the Adviser based on the annual rate of the Funds average daily net assets as follows:
Average Daily Net Assets | Rate | |||||||
First $250 million |
0 | .95% | ||||||
Next $250 million |
0 | .925% | ||||||
Next $500 million |
0 | .90% | ||||||
Next $1.5 billion |
0 | .875% | ||||||
Next $2.5 billion |
0 | .85% | ||||||
Next $2.5 billion |
0 | .825% | ||||||
Next $2.5 billion |
0 | .80% | ||||||
Over $10 billion |
0 | .775% |
For the year ended December 31, 2017, the effective advisory fees incurred by the Fund was 0.91%.
The Subsidiary has entered into a separate contract with the Adviser whereby the Adviser provides investment advisory and other services to the Subsidiary. In consideration of these services, the Subsidiary pays an advisory fee to the Adviser based on the annual rate of the Subsidiarys average daily net assets as set forth in the table above.
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. and separate sub-advisory agreements with Invesco PowerShares Capital Management LLC and Invesco Asset Management (India) Private Limited (collectively, the Affiliated Sub-Advisers) the Adviser, not the Fund, will pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least April 30, 2019, to waive advisory fees and/or reimburse expenses of shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (including prior fiscal year-end Acquired Fund Fees and Expenses of 0.13% and excluding certain items discussed below) of Series I shares to 0.80% and Series II shares to 1.05% of average daily net assets (the expense limits). In determining the Advisers obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Acquired Fund Fees and Expenses are not operating expenses of the Fund directly, but are fees and expenses, including management fees, of the investment companies in which the Fund invests. As a result, the total annual fund operating expenses after expense reimbursement may exceed the expense limits above. Unless Invesco continues the fee waiver agreement, it will terminate on April 30, 2019. During its term, the fee waiver agreement cannot be terminated or amended to increase the expense limits or reduce the advisory fee waiver without approval of the Board of Trustees.
Further, the Adviser has contractually agreed, through at least June 30, 2019, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the year ended December 31, 2017, the Adviser waived advisory fees of $5,103,040.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco a fee for costs incurred in providing accounting services and fund administrative services to the Fund and to reimburse Invesco for fees paid to insurance companies that have agreed to provide certain administrative services to the Fund. These administrative services provided by the insurance companies may include, among other things: maintenance of master accounts with the Fund; tracking, recording and transmitting net purchase and redemption orders for Fund shares; maintaining and preserving records related to the purchase, redemption and other account activity of variable product owners; distributing copies of Fund documents such as prospectuses, proxy materials and periodic reports, to variable product owners, and responding to inquiries from variable product owners about the Fund. Pursuant to such agreement, for the year ended December 31, 2017, Invesco was paid $277,985 for accounting and fund administrative services and was reimbursed $1,779,710 for fees paid to insurance companies.
Invesco V.I. Balanced-Risk Allocation Fund
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (IIS) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. For the year ended December 31, 2017, expenses incurred under the agreement are shown in the Consolidated Statement of Operations as Transfer agent fees.
The Trust has entered into a master distribution agreement with Invesco Distributors, Inc. (IDI) to serve as the distributor for the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Funds Series II shares (the Plan). The Fund, pursuant to the Plan, pays IDI compensation at the annual rate of 0.25% of the Funds average daily net assets of Series II shares. The fees are accrued daily and paid monthly. Of the Plan payments, up to 0.25% of the average daily net assets of the Series II shares may be paid to insurance companies who furnish continuing personal shareholder services to customers who purchase and own Series II shares of the Fund. For the year ended December 31, 2017, expenses incurred under the Plan are detailed in the Consolidated Statement of Operations as Distribution fees.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
NOTE 3Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investments assigned level:
Level 1 | Prices are determined using quoted prices in an active market for identical assets. |
Level 2 | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Level 3 | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Funds own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of December 31, 2017. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the consolidated financial statements may materially differ from the value received upon actual sale of those investments.
The Funds policy is to recognize transfers in and out of the valuation levels as of the end of the reporting period. During the year ended December 31, 2017, there were no material transfers between valuation levels.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Investments in Securities |
||||||||||||||||
U.S. Treasury Securities |
$ | | $ | 131,303,781 | $ | | $ | 131,303,781 | ||||||||
Commodity Linked Securities |
| 23,918,960 | | 23,918,960 | ||||||||||||
Money Market Funds |
1,004,893,828 | | | 1,004,893,828 | ||||||||||||
Total Investments in Securities |
1,004,893,828 | 155,222,741 | | 1,160,116,569 | ||||||||||||
Other Investments Assets* |
||||||||||||||||
Futures Contracts |
15,419,756 | | | 15,419,756 | ||||||||||||
Swap Agreements |
| 8,191,193 | | 8,191,193 | ||||||||||||
15,419,756 | 8,191,193 | | 23,610,949 | |||||||||||||
Other Investments Liabilities* |
||||||||||||||||
Futures Contracts |
(7,591,168 | ) | | | (7,591,168 | ) | ||||||||||
Swap Agreements |
| (74,084 | ) | | (74,084 | ) | ||||||||||
(7,591,168 | ) | (74,084 | ) | | (7,665,252 | ) | ||||||||||
Total Other Investments |
7,828,588 | 8,117,109 | | 15,945,697 | ||||||||||||
Total Investments |
$ | 1,012,722,416 | $ | 163,339,850 | $ | | $ | 1,176,062,266 |
* | Unrealized appreciation (depreciation). |
NOTE 4Derivative Investments
The Fund may enter into an International Swaps and Derivatives Association Master Agreement (ISDA Master Agreement) under which a fund may trade OTC derivatives. An OTC transaction entered into under an ISDA Master Agreement typically involves a collateral posting arrangement, payment netting provisions and close-out netting provisions. These netting provisions allow for reduction of credit risk through netting of contractual obligations. The enforceability of the netting provisions of the ISDA Master Agreement depends on the governing law of the ISDA Master Agreement, among other factors.
For financial reporting purposes, the Fund does not offset OTC derivative assets or liabilities that are subject to ISDA Master Agreements in the Consolidated Statement of Assets and Liabilities.
Invesco V.I. Balanced-Risk Allocation Fund
Value of Derivative Investments at Period-End
The table below summarizes the value of the Funds derivative investments, detailed by primary risk exposure, held as of December 31, 2017:
Value | ||||||||||||||||
Derivative Assets | Commodity Risk |
Equity Risk | Interest Rate Risk |
Total | ||||||||||||
Unrealized appreciation on futures contracts Exchange-Traded(a) |
$ | 5,969,784 | $ | 8,595,430 | $ | 854,542 | $ | 15,419,756 | ||||||||
Unrealized appreciation on swap agreements OTC |
7,857,477 | 333,716 | | 8,191,193 | ||||||||||||
Total Derivative Assets |
13,827,261 | 8,929,146 | 854,542 | 23,610,949 | ||||||||||||
Derivatives not subject to master netting agreements |
(5,969,784 | ) | (8,595,430 | ) | (854,542 | ) | (15,419,756 | ) | ||||||||
Total Derivative Assets subject to master netting agreements |
$ | 7,857,477 | $ | 333,716 | $ | | $ | 8,191,193 | ||||||||
Value | ||||||||||||||||
Derivative Liabilities | Commodity Risk |
Equity Risk | Interest Rate Risk |
Total | ||||||||||||
Unrealized depreciation on futures contracts Exchange-Traded(a) |
$ | (96,852 | ) | $ | (2,208,417 | ) | $ | (5,285,899 | ) | $ | (7,591,168 | ) | ||||
Unrealized depreciation on swap agreements OTC |
| | (74,084 | ) | (74,084 | ) | ||||||||||
Total Derivative Liabilities |
(96,852 | ) | (2,208,417 | ) | (5,359,983 | ) | (7,665,252 | ) | ||||||||
Derivatives not subject to master netting agreements |
96,852 | 2,208,417 | 5,285,899 | 7,591,168 | ||||||||||||
Total Derivative Liabilities subject to master netting agreements |
$ | | $ | | $ | (74,084 | ) | $ | (74,084 | ) |
(a) | The daily variation margin receivable at period-end is recorded in the Consolidated Statement of Assets and Liabilities. |
Offsetting Assets and Liabilities
The table below reflects the Funds exposure to Counterparties subject to either an ISDA Master Agreement or other agreement for OTC derivative transactions as of December 31, 2017.
Financial Derivative Assets |
Financial Derivative Liabilities |
Net Value of Derivatives |
Collateral (Received)/Pledged |
Net Amount(b) |
||||||||||||||||||||
Counterparty | Swap Agreements |
Swap Agreements |
Non-Cash | Cash | ||||||||||||||||||||
Fund |
||||||||||||||||||||||||
Goldman Sachs International |
$ | 333,716 | $ | (111,592 | ) | $ | 222,124 | $ | | $ | | $ | 222,124 | |||||||||||
Macquarie Bank Ltd. |
| (75,025 | ) | (75,025 | ) | | | (75,025 | ) | |||||||||||||||
Subtotal Fund |
333,716 | (186,617 | ) | 147,099 | | | 147,099 | |||||||||||||||||
Subsidiary |
||||||||||||||||||||||||
Barclays Bank PLC |
1,933,173 | (12,482 | ) | 1,920,691 | | | 1,920,691 | |||||||||||||||||
Cargill, Inc. |
311,754 | (24,698 | ) | 287,056 | | | 287,056 | |||||||||||||||||
Canadian Imperial Bank of Commerce |
2,638,807 | (24,193 | ) | 2,614,614 | | | 2,614,614 | |||||||||||||||||
Goldman Sachs International |
114,705 | (8,981 | ) | 105,724 | | | 105,724 | |||||||||||||||||
J.P. Morgan Chase Bank, N.A. |
898,584 | (1,280 | ) | 897,304 | | | 897,304 | |||||||||||||||||
Macquarie Bank Ltd. |
832,704 | (1,164 | ) | 831,540 | | (260,000 | ) | 571,540 | ||||||||||||||||
Merrill Lynch International |
811,294 | (421,104 | ) | 390,190 | | | 390,190 | |||||||||||||||||
Morgan Stanley Capital Services LLC |
1,449,522 | (2,473 | ) | 1,447,049 | | (1,340,000 | ) | 107,049 | ||||||||||||||||
Subtotal Subsidiary |
$ | 8,990,543 | $ | (496,375 | ) | $ | 8,494,168 | $ | | $ | (1,600,000 | ) | $ | 6,894,168 | ||||||||||
Total |
$ | 9,324,259 | $ | (682,992 | ) | $ | 8,641,267 | $ | | $ | (1,600,000 | ) | $ | 7,041,267 |
(b) | The Fund and the Subsidiary are recognized as separate legal entities and as such are subject to separate netting arrangements with the Counterparty. |
Invesco V.I. Balanced-Risk Allocation Fund
Effect of Derivative Investments for the year ended December 31, 2017
The table below summarizes the gains (losses) on derivative investments, detailed by primary risk exposure, recognized in earnings during the period:
Location of Gain (Loss) on Consolidated Statement of Operations |
||||||||||||||||
Commodity Risk |
Equity Risk | Interest Rate Risk |
Total | |||||||||||||
Realized Gain (Loss): |
||||||||||||||||
Futures contracts |
$ | 3,485,053 | $ | 82,408,649 | $ | 13,270,214 | $ | 99,163,916 | ||||||||
Swap agreements |
3,059,735 | 6,764,613 | (667,356 | ) | 9,156,992 | |||||||||||
Change in Net Unrealized Appreciation (Depreciation): |
||||||||||||||||
Futures contracts |
3,100,499 | (269,988 | ) | (5,000,510 | ) | (2,169,999 | ) | |||||||||
Swap agreements |
9,714,697 | 55,671 | (74,084 | ) | 9,696,284 | |||||||||||
Total |
$ | 19,359,984 | $ | 88,958,945 | $ | 7,528,264 | $ | 115,847,193 |
The table below summarizes the average notional value of futures contracts and swap agreements outstanding during the period.
Futures Contracts |
Swap Agreements |
|||||||
Average notional value |
$ | 1,356,016,346 | $ | 278,427,349 |
NOTE 5Trustees and Officers Fees and Benefits
Trustees and Officers Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees and Officers Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees were eligible to participate in a retirement plan that provided for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees and Officers Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 6Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period-end, are shown in the Consolidated Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 7Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended December 31, 2017 and 2016:
2017 | 2016 | |||||||
Ordinary income |
$ | 72,920,240 | $ | 2,106,720 | ||||
Long-term capital gain |
37,008,399 | | ||||||
Total distributions |
$ | 109,928,639 | $ | 2,106,720 |
Tax Components of Net Assets at Period-End:
2017 | ||||
Undistributed ordinary income |
$ | 82,771,063 | ||
Undistributed long-term gain |
26,864,066 | |||
Net unrealized appreciation (depreciation) investments |
(245,481 | ) | ||
Net unrealized appreciation foreign currencies |
48 | |||
Temporary book/tax differences |
(103,983 | ) | ||
Shares of beneficial interest |
1,088,131,232 | |||
Total net assets |
$ | 1,197,416,945 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Funds net unrealized appreciation (depreciation) difference is attributable primarily to futures contracts and swap agreements.
Invesco V.I. Balanced-Risk Allocation Fund
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Funds temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund does not have a capital loss carryforward as of December 31, 2017.
NOTE 8Investment Transactions
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended December 31, 2017 was $23,900,000 and $20,590,483, respectively. During the same period, sales of U.S. Treasury obligations were $42,675,466. Cost of investments, including any derivatives, on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investments on a Tax Basis | ||||
Aggregate unrealized appreciation of investments |
$ | 56,710,161 | ||
Aggregate unrealized (depreciation) of investments |
(56,955,642 | ) | ||
Net unrealized appreciation (depreciation) of investments |
$ | (245,481 | ) | |
Cost of investments for tax purposes is $1,176,307,747. |
NOTE 9Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of swap agreement income and futures contracts, on December 31, 2017, undistributed net investment income was increased by $6,622,562, undistributed net realized gain was decreased by $6,539,825 and shares of beneficial interest was decreased by $82,737. This reclassification had no effect on the net assets of the Fund.
NOTE 10Share Information
Summary of Share Activity | ||||||||||||||||
Years ended December 31, | ||||||||||||||||
2017(a) | 2016 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: |
||||||||||||||||
Series I |
353,444 | $ | 4,089,594 | 2,079,260 | $ | 23,038,972 | ||||||||||
Series II |
11,147,285 | 127,157,678 | 20,137,979 | 220,328,126 | ||||||||||||
Issued as reinvestment of dividends: |
||||||||||||||||
Series I |
330,067 | 3,554,824 | 12,271 | 141,114 | ||||||||||||
Series II |
9,988,152 | 106,373,815 | 172,876 | 1,965,605 | ||||||||||||
Reacquired: |
||||||||||||||||
Series I |
(264,404 | ) | (3,038,309 | ) | (1,664,871 | ) | (18,448,956 | ) | ||||||||
Series II |
(16,688,062 | ) | (189,658,705 | ) | (14,209,711 | ) | (152,058,612 | ) | ||||||||
Net increase in share activity |
4,866,482 | $ | 48,478,897 | 6,527,804 | $ | 74,966,249 |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 83% of the outstanding shares of the Fund. The Fund and the Funds principal underwriter or adviser, are parties to participation agreements with these entities whereby these entities sell units of interest in separate accounts funding variable products that are invested in the Fund. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
Invesco V.I. Balanced-Risk Allocation Fund
NOTE 11Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Net asset value, beginning of period |
Net investment income (loss)(a) |
Net gains (losses) on securities (both realized and unrealized) |
Total from investment operations |
Dividends from net investment income |
Distributions from net realized gains |
Total distributions |
Net asset value, end of period |
Total return(b) |
Net assets, end of period |
Ratio of expenses to average net assets with fee waivers and/or expenses absorbed |
Ratio of expenses to average net assets without fee waivers and/or expenses absorbed |
Ratio of net investment income (loss) to average net assets |
Portfolio turnover(c) |
|||||||||||||||||||||||||||||||||||||||||||
Series I |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/17 |
$ | 11.35 | $ | 0.01 | $ | 1.08 | $ | 1.09 | $ | (0.48 | ) | $ | (0.65 | ) | $ | (1.13 | ) | $ | 11.31 | 10.06 | % | $ | 39,340 | 0.68 | %(d)(e) | 1.11 | %(d) | 0.10 | %(d) | 52 | % | |||||||||||||||||||||||||
Year ended 12/31/16 |
10.20 | (0.04 | ) | 1.24 | 1.20 | (0.05 | ) | | (0.05 | ) | 11.35 | 11.74 | 34,714 | 0.67 | (e) | 1.12 | (0.33 | ) | 120 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 |
12.30 | (0.07 | ) | (0.44 | ) | (0.51 | ) | (0.52 | ) | (1.07 | ) | (1.59 | ) | 10.20 | (4.10 | ) | 26,854 | 0.69 | 1.15 | (0.61 | ) | 44 | ||||||||||||||||||||||||||||||||||
Year ended 12/31/14 |
12.30 | (0.08 | ) | 0.80 | 0.72 | | (0.72 | ) | (0.72 | ) | 12.30 | 5.91 | 11,397 | 0.69 | (e) | 1.11 | (0.65 | ) | 60 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 |
12.65 | (0.08 | ) | 0.30 | 0.22 | (0.21 | ) | (0.36 | ) | (0.57 | ) | 12.30 | 1.70 | 8,821 | 0.70 | 1.11 | (0.65 | ) | 76 | |||||||||||||||||||||||||||||||||||||
Series II |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/17 |
11.22 | (0.02 | ) | 1.07 | 1.05 | (0.45 | ) | (0.65 | ) | (1.10 | ) | 11.17 | 9.83 | 1,158,077 | 0.93 | (d)(e) | 1.36 | (d) | (0.15 | )(d) | 52 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/16 |
10.08 | (0.06 | ) | 1.22 | 1.16 | (0.02 | ) | | (0.02 | ) | 11.22 | 11.51 | 1,113,539 | 0.92 | (e) | 1.37 | (0.58 | ) | 120 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 |
12.17 | (0.10 | ) | (0.44 | ) | (0.54 | ) | (0.48 | ) | (1.07 | ) | (1.55 | ) | 10.08 | (4.40 | ) | 939,354 | 0.94 | 1.40 | (0.86 | ) | 44 | ||||||||||||||||||||||||||||||||||
Year ended 12/31/14 |
12.21 | (0.12 | ) | 0.80 | 0.68 | | (0.72 | ) | (0.72 | ) | 12.17 | 5.62 | 1,002,835 | 0.94 | (e) | 1.36 | (0.90 | ) | 60 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 |
12.57 | (0.11 | ) | 0.30 | 0.19 | (0.19 | ) | (0.36 | ) | (0.55 | ) | 12.21 | 1.50 | 1,369,485 | 0.95 | 1.36 | (0.90 | ) | 76 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year, if applicable and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns. |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. |
(d) | Ratios are based on average daily net assets (000s omitted) of $36,709 and $1,150,181 for Series I and Series II shares, respectively. |
(e) | In addition to the fees and expenses which the Fund bears directly; the Fund indirectly bears a pro rata share of the fees and expenses of the underlying funds in which the Fund invests. Because the underlying funds have varied expenses and fee levels and the Fund may own different proportions at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. Estimated underlying fund expenses are not expenses that are incurred directly by your Fund. They are expenses that are incurred directly by the underlying funds and are deducted from the value of the funds your Fund invests in. The effect of the estimated underlying fund expenses that you bear indirectly is included in your Funds total return. Estimated acquired fund fees from underlying funds were 0.15%, 0.13% and 0.09% for the year ended December 31, 2017, 2016 and 2014, respectively. |
Invesco V.I. Balanced-Risk Allocation Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
and Shareholders of Invesco V.I. Balanced-Risk Allocation Fund
Opinion on the Financial Statements
We have audited the accompanying consolidated statement of assets and liabilities, including the consolidated schedule of investments, of Invesco V.I. Balanced-Risk Allocation Fund and its subsidiary (one of the funds constituting AIM Variable Insurance Funds (Invesco Variable Insurance Funds), hereafter collectively referred to as the Fund) as of December 31, 2017, the related consolidated statement of operations for the year ended December 31, 2017, the consolidated statement of changes in net assets for each of the two years in the period ended December 31, 2017, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2017 (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period ended December 31, 2017 and the financial highlights for each of the five years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Funds management. Our responsibility is to express an opinion on the Funds financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2017 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, TX
February 14, 2018
We have served as the auditor of one or more of the investment companies in the Invesco/PowerShares group of investment companies since at least 1995. We have not determined the specific year we began serving as auditor.
Invesco V.I. Balanced-Risk Allocation Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period July 1, 2017 through December 31, 2017.
The actual and hypothetical expenses in the examples below do not represent the effect of any fees or other expenses assessed in connection with a variable product; if they did, the expenses shown would be higher while the ending account values shown would be lower.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled Actual Expenses Paid During Period to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Funds actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs. Therefore, the hypothetical information is useful in comparing ongoing costs, and will not help you determine the relative total costs of owning different funds.
Class |
Beginning |
ACTUAL | HYPOTHETICAL (5% annual return before expenses) |
Annualized Ratio |
||||||||||||||||||||
Ending Account Value (12/31/17)1 |
Expenses Paid During Period2 |
Ending Account Value (12/31/17) |
Expenses Paid During Period2 |
|||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 1,077.80 | $ | 3.56 | $ | 1,021.78 | $ | 3.47 | 0.68 | % | ||||||||||||
Series II | 1,000.00 | 1,077.20 | 4.87 | 1,020.52 | 4.74 | 0.93 |
1 | The actual ending account value is based on the actual total return of the Fund for the period July 1, 2017 through December 31, 2017, after actual expenses and will differ from the hypothetical ending account value which is based on the Funds expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Funds annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half year. |
Invesco V.I. Balanced-Risk Allocation Fund
Tax Information
Form 1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific states requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended December 31, 2017:
Federal and State Income Tax |
||||
Long-Term Capital Gain Distributions |
$ | 37,008,399 | ||
Corporate Dividends Received Deduction* |
0.00 | % | ||
U.S. Treasury Obligations* |
4.43 | % |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Funds fiscal year. |
Invesco V.I. Balanced-Risk Allocation Fund
Trustees and Officers
The address of each trustee and officer is AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Trust), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trusts organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 1960 Trustee |
2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business
Formerly: Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US), Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) |
158 | None | ||||
Philip A. Taylor2 1954 Trustee and Senior Vice President |
2006 | Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco Aim Management Group, Inc.) (financial services holding company); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.) (registered transfer agent); Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company); Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management).
Formerly: Co-Chairman, Co-President and Co-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chief Executive Officer and President, Van Kampen Exchange Corp; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurers Series Trust (Invesco Treasurers Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurers Series Trust (Invesco Treasurers Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) (registered broker dealer); Manager, Invesco PowerShares Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco Aim Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurers Series Trust (Invesco Treasurers Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. |
158 | None |
1 | Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser. |
2 | Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser. |
Invesco V.I. Balanced-Risk Allocation Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Independent Trustees | ||||||||
Bruce L. Crockett 1944 Trustee and Chair |
1993 | Chairman, Crockett Technologies Associates (technology consulting company)
Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute: Member of the Audit Committee, Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council |
158 | Director and Chairman of the Audit Committee, ALPS (Attorneys Liability Protection Society) (insurance company); Director and Member of the Audit Committee and Compensation Committee, Ferroglobe PLC (metallurgical company) | ||||
David C. Arch 1945 Trustee |
2010 | Chairman of Blistex Inc. (consumer health care products manufacturer); Member, World Presidents Organization | 158 | Board member of the Illinois Manufacturers Association | ||||
Jack M. Fields 1952 Trustee |
1997 | Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Chairman, Discovery Learning Alliance (non-profit)
Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff) (human resources provider); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives |
158 | None | ||||
Cynthia Hostetler 1962 Trustee |
2017 | Non-Executive Director and Trustee of a number of public and private business corporations
Formerly: Head of Investment Funds and Private Equity, Overseas Private Investment Corporation; President, First Manhattan Bancorporation, Inc.; Attorney, Simpson Thacher & Bartlett LLP |
158 | Vulcan Materials Company (construction materials company); Trilinc Global Impact Fund; Aberdeen Investment Funds (4 portfolios); Artio Global Investment LLC (mutual fund complex); Edgen Group, Inc. (specialized energy and infrastructure products distributor) | ||||
Eli Jones 1961 Trustee |
2016 | Professor and Dean, Mays Business School Texas A&M University
Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University; Director, Arvest Bank |
158 | Insperity, Inc. (formerly known as Administaff) (human resources provider) | ||||
Prema Mathai-Davis 1950 Trustee |
1998 | Retired. | 158 | None | ||||
Teresa M. Ressel 1962 Trustee |
2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Chief Financial Officer, Olayan America, The Olayan Group (international investor/commercial/industrial); Chief Executive Officer, UBS Securities LLC; Group Chief Operating Officer, Americas, UBS AG; Assistant Secretary for Management & Budget and CFO, US Department of the Treasury |
158 | Atlantic Power Corporation (power generation company); ON Semiconductor Corp. (semiconductor supplier) | ||||
Ann Barnett Stern 1957 Trustee |
2017 | President and Chief Executive Officer, Houston Endowment Inc. (private philanthropic institution)
Formerly: Executive Vice President and General Counsel, Texas Childrens Hospital; Attorney, Beck, Redden and Secrest, LLP; Business Law Instructor, University of St. Thomas; Attorney, Andrews & Kurth LLP |
158 | Federal Reserve Bank of Dallas | ||||
Raymond Stickel, Jr. 1944 Trustee |
2005 | Retired.
Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios); Partner, Deloitte & Touche |
158 | None | ||||
Robert C. Troccoli 1949 Trustee |
2016 | Adjunct Professor, University of Denver Daniels College of Business
Formerly: Senior Partner, KPMG LLP |
158 | None | ||||
Christopher L. Wilson 1957 Trustee |
2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Managing Partner, CT2, LLC (investing and consulting firm); President/Chief Executive Officer, Columbia Funds, Bank of America Corporation; President/Chief Executive Officer, CDC IXIS Asset Management Services, Inc.; Principal & Director of Operations, Scudder Funds, Scudder, Stevens & Clark, Inc.; Assistant Vice President, Fidelity Investments |
158 | TD Asset Management USA Inc. (mutual fund complex) (22 portfolios); ISO New England, Inc. (non-profit organization managing regional electricity market) |
Invesco V.I. Balanced-Risk Allocation Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers | ||||||||
Sheri Morris 1964 President, Principal Executive Officer and Treasurer |
1999 | President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco Aim Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; and Treasurer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust and PowerShares Actively Managed Exchange-Traded Fund Trust |
N/A | N/A | ||||
Russell C. Burk 1958 Senior Vice President and Senior Officer |
2005 | Senior Vice President and Senior Officer, The Invesco Funds | N/A | N/A | ||||
John M. Zerr 1962 Senior Vice President, Chief Legal Officer and Secretary |
2006 | Director, Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Managing Director, Invesco PowerShares Capital Management LLC; Director, Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust; Manager and Secretary, Invesco Indexing LLC
Formerly: Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser); Vice President and Secretary, PBHG Funds (an investment company) and PBHG Insurance Series Fund (an investment company); Chief Operating Officer, General Counsel and Secretary, Old Mutual Investment Partners (a broker-dealer); General Counsel and Secretary, Old Mutual Fund Services (an administrator) and Old Mutual Shareholder Services (a shareholder servicing center); Executive Vice President, General Counsel and Secretary, Old Mutual Capital, Inc. (an investment adviser); and Vice President and Secretary, Old Mutual Advisors Funds (an investment company) |
N/A | N/A | ||||
Gregory G. McGreevey 1962 Senior Vice President |
2012 | Senior Managing Director, Invesco Ltd.; Director, Chairman, President, and Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President, Invesco Management Group, Inc.; Director, Invesco Mortgage Capital, Inc. and Invesco Senior Secured Management, Inc.; and Senior Vice President, The Invesco Funds
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A | ||||
Kelli Gallegos 1970 Vice President, Principal Financial Officer and Assistant Treasurer |
2008 | Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A |
Invesco V.I. Balanced-Risk Allocation Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers(continued) | ||||||||
Tracy Sullivan 1962 Vice President, Chief Tax Officer and Assistant Treasurer |
2008 | Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A | ||||
Crissie M. Wisdom 1969 Anti-Money Laundering Compliance Officer |
2013 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., Invesco Management Group, Inc., The Invesco Funds, and PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp. |
N/A | N/A | ||||
Robert R. Leveille 1969 Chief Compliance Officer |
2016 | Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds
Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds |
N/A | N/A |
The Statement of Additional Information of the Trust includes additional information about the Funds Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Funds Statement of Additional Information for information on the Funds sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 |
Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Auditors PricewaterhouseCoopers LLP 1000 Louisiana Street, Suite 5800 Houston, TX 77002-5678 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2005 Market Street, Suite 2600 Philadelphia, PA 19103-7018 |
Counsel to the Independent Trustees Goodwin Procter LLP 901 New York Avenue, N.W. Washington, D.C. 20001 |
Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
Invesco V.I. Balanced-Risk Allocation Fund
| ||||
Annual Report to Shareholders
|
December 31, 2017 | |||
| ||||
Invesco V.I. Comstock Fund
|
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Funds semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The Funds Form N-Q filings are available on the SEC website, sec.gov. Copies of the Funds Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-07452 and 033-57340. The Funds most recent portfolio holdings, as filed on Form N-Q, have also been made available to insurance companies issuing variable annuity contracts and variable life insurance policies (variable products) that invest in the Fund. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/ proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
This report must be accompanied or preceded by a currently effective Fund prospectus and variable product prospectus, which contain more complete information, including sales charges and expenses. Investors should read each carefully before investing.
| ||
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
Invesco Distributors, Inc. | VK-VICOM-AR-1 | 02072018 1554 |
Managements Discussion of Fund Performance
Invesco V.I. Comstock Fund
Invesco V.I. Comstock Fund
Your Funds Long-Term Performance
Results of a $10,000 Investment - Oldest Share Class(es)
Fund and index data from 12/31/07
1 | Source: FactSet Research Systems Inc. |
2 | Source: Lipper Inc. |
Past performance cannot guarantee
comparable future results.
Invesco V.I. Comstock Fund
Invesco V.I. Comstock Funds investment objective is to seek capital growth and income through investments in equity securities, including common stocks, preferred stocks and securities convertible into common and preferred stocks.
∎ | Unless otherwise stated, information presented in this report is as of December 31, 2017, and is based on total net assets. |
∎ | Unless otherwise noted, all data provided by Invesco. |
Invesco V.I. Comstock Fund
Invesco V.I. Comstock Fund
Schedule of Investments(a)
December 31, 2017
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Comstock Fund
Investment Abbreviations:
ADR | American Depositary Receipt |
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poors. |
(b) | Non-income producing security. |
(c) | The money market fund and the Fund are affiliated by having the same investment adviser. The rate shown is the 7-day SEC standardized yield as of December 31, 2017. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Comstock Fund
Open Forward Foreign Currency Contracts | ||||||||||||||||||||||
Settlement Date
|
Counterparty |
Contract to | Unrealized Appreciation (Depreciation) |
|||||||||||||||||||
Deliver | Receive | |||||||||||||||||||||
01/19/2018 |
Barclays Bank PLC |
CAD | 16,679,199 | USD | 12,951,851 | $ | (322,619 | ) | ||||||||||||||
01/19/2018 |
Barclays Bank PLC |
CHF | 3,517,294 | USD | 3,578,049 | (37,690 | ) | |||||||||||||||
01/19/2018 |
Barclays Bank PLC |
GBP | 10,158,735 | USD | 13,587,028 | (138,484 | ) | |||||||||||||||
01/19/2018 |
CIBC World Markets Corp. |
EUR | 16,700,324 | USD | 19,793,224 | (270,502 | ) | |||||||||||||||
01/19/2018 |
Deutsche Bank Securities Inc. |
CAD | 16,679,199 | USD | 12,950,594 | (323,876 | ) | |||||||||||||||
01/19/2018 |
Deutsche Bank Securities Inc. |
CHF | 3,517,294 | USD | 3,574,849 | (40,890 | ) | |||||||||||||||
01/19/2018 |
Deutsche Bank Securities Inc. |
GBP | 11,868,295 | USD | 15,880,309 | (154,998 | ) | |||||||||||||||
01/19/2018 |
Goldman Sachs International |
CHF | 3,517,294 | USD | 3,573,760 | (41,979 | ) | |||||||||||||||
01/19/2018 |
Goldman Sachs International |
EUR | 16,700,324 | USD | 19,785,041 | (278,685 | ) | |||||||||||||||
01/19/2018 |
Goldman Sachs International |
GBP | 10,158,735 | USD | 13,590,152 | (135,360 | ) | |||||||||||||||
01/19/2018 |
JPMorgan Chase Bank, N.A. |
CAD | 16,679,199 | USD | 12,949,387 | (325,083 | ) | |||||||||||||||
01/19/2018 |
JPMorgan Chase Bank, N.A. |
CHF | 3,517,080 | USD | 3,572,489 | (43,030 | ) | |||||||||||||||
01/19/2018 |
JPMorgan Chase Bank, N.A. |
EUR | 16,703,876 | USD | 19,792,423 | (275,570 | ) | |||||||||||||||
01/19/2018 |
RBC Capital Markets Corp. |
CAD | 16,679,101 | USD | 12,945,994 | (328,398 | ) | |||||||||||||||
01/19/2018 |
RBC Capital Markets Corp. |
EUR | 16,700,324 | USD | 19,786,961 | (276,765 | ) | |||||||||||||||
01/19/2018 |
RBC Capital Markets Corp. |
GBP | 10,158,735 | USD | 13,590,355 | (135,157 | ) | |||||||||||||||
Total Forward Foreign Currency Contracts Currency Risk |
$ | (3,129,086 | ) |
Abbreviations:
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Comstock Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Comstock Fund
Statement of Changes in Net Assets
For the years ended December 31, 2017 and 2016
2017 | 2016 | |||||||
Operations: |
||||||||
Net investment income |
$ | 23,545,726 | $ | 36,500,553 | ||||
Net realized gain |
156,183,437 | 78,523,600 | ||||||
Change in net unrealized appreciation |
123,678,223 | 178,667,857 | ||||||
Net increase in net assets resulting from operations |
303,407,386 | 293,692,010 | ||||||
Distributions to shareholders from net investment income: |
||||||||
Series I |
(5,551,772 | ) | (3,755,275 | ) | ||||
Series ll |
(31,132,801 | ) | (21,043,734 | ) | ||||
Total distributions from net investment income |
(36,684,573 | ) | (24,799,009 | ) | ||||
Distributions to shareholders from net realized gains: |
||||||||
Series l |
(10,812,478 | ) | (18,737,448 | ) | ||||
Series ll |
(68,204,783 | ) | (126,507,707 | ) | ||||
Total distributions from net realized gains |
(79,017,261 | ) | (145,245,155 | ) | ||||
Share transactionsnet: |
||||||||
Series l |
(11,573,352 | ) | (92,188,106 | ) | ||||
Series ll |
(198,048,701 | ) | 22,299,020 | |||||
Net increase (decrease) in net assets resulting from share transactions |
(209,622,053 | ) | (69,889,086 | ) | ||||
Net increase (decrease) in net assets |
(21,916,501 | ) | 53,758,760 | |||||
Net assets: |
||||||||
Beginning of year |
1,935,848,338 | 1,882,089,578 | ||||||
End of year (includes undistributed net investment income of $23,361,865 and $36,453,985, respectively) |
$ | 1,913,931,837 | $ | 1,935,848,338 |
Notes to Financial Statements
December 31, 2017
NOTE 1Significant Accounting Policies
Invesco V.I. Comstock Fund (the Fund) is a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Trust). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end series management investment company consisting of twenty-four separate portfolios, (each constituting a Fund). The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each Fund or class will be voted on exclusively by the shareholders of such Fund or class. Current Securities and Exchange Commission (SEC) guidance, however, requires participating insurance companies offering separate accounts to vote shares proportionally in accordance with the instructions of the contract owners whose investments are funded by shares of each Fund or class.
The Funds investment objective is to seek capital growth and income through investments in equity securities, including common stocks, preferred stocks and securities convertible into common and preferred stocks.
The Fund currently offers two classes of shares, Series I and Series II, both of which are offered to insurance company separate accounts funding variable annuity contracts and variable life insurance policies (variable products).
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946, Financial Services Investment Companies.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations Securities, including restricted securities, are valued according to the following policy. |
A security listed or traded on an exchange (except convertible securities) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and asked prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and asked prices. For purposes of determining net asset value (NAV) per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (NYSE).
Invesco V.I. Comstock Fund
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end-of-day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
Debt obligations (including convertible securities) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual trading characteristics and other market data. Pricing services generally value debt obligations assuming orderly transactions of institutional round lot size, but a fund may hold or transact in the same securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Foreign securities (including foreign exchange contracts) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that the investment adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trusts officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/asked quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a securitys fair value.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuers assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
B. | Securities Transactions and Investment Income Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any) is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Funds net asset value and, accordingly, they reduce the Funds total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and the Statement of Changes in Net Assets, or the net investment income per share and the ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. | Country Determination For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuers securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
D. | Distributions Distributions from net investment income and net realized capital gain, if any, are generally declared and paid to separate accounts of participating insurance companies annually and recorded on the ex-dividend date. |
Invesco V.I. Comstock Fund
E. | Federal Income Taxes The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the Internal Revenue Code), necessary to qualify as a regulated investment company and to distribute substantially all of the Funds taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. |
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Funds uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
F. | Expenses Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
G. | Accounting Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
H. | Indemnifications Under the Trusts organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Funds servicing agreements, that contain a variety of indemnification clauses. The Funds maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
I. | Foreign Currency Translations Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Funds books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. |
The Fund may invest in foreign securities, which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests and are shown in the Statement of Operations.
J. | Forward Foreign Currency Contracts The Fund may engage in foreign currency transactions either on a spot (i.e. for prompt delivery and settlement) basis, or through forward foreign currency contracts, to manage or minimize currency or exchange rate risk. |
The Fund may also enter into forward foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to lock in the U.S. dollar price of that security, or the Fund may also enter into forward foreign currency contracts that do not provide for physical settlement of the two currencies, but instead are settled by a single cash payment calculated as the difference between the agreed upon exchange rate and the spot rate at settlement based upon an agreed upon notional amount (non-deliverable forwards). The Fund will set aside liquid assets in an amount equal to the daily mark-to-market obligation for forward foreign currency contracts.
A forward foreign currency contract is an obligation between two parties (Counterparties) to purchase or sell a specific currency for an agreed-upon price at a future date. The use of forward foreign currency contracts does not eliminate fluctuations in the price of the underlying securities the Fund owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statement of Operations. The primary risks associated with forward foreign currency contracts include failure of the Counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities.
NOTE 2Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the Adviser or Invesco). Under the terms of the investment advisory agreement, the Fund accrues daily and pays monthly an advisory fee to the Adviser based on the annual rate of the Funds average daily net assets as follows:
Average Daily Net Assets | Rate | |||
First $500 million |
0.60% | |||
Over $500 million |
0.55% |
For the year ended December 31, 2017, the effective advisory fees incurred by the Fund was 0.56%.
Invesco V.I. Comstock Fund
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. and separate sub-advisory agreements with Invesco PowerShares Capital Management LLC and Invesco Asset Management (India) Private Limited (collectively, the Affiliated Sub-Advisers) the Adviser, not the Fund, will pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least April 30, 2019, to waive advisory fees and/or reimburse expenses to the extent necessary to limit total annual operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Series I shares to 0.78% and Series II shares to 1.03% of average daily net assets (the expense limits). In determining the Advisers obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause total annual operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on April 30, 2019. During its term, the fee waiver agreement cannot be terminated or amended to increase the expense limits or reduce the advisory fee waiver without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
Further, the Adviser has contractually agreed, through at least June 30, 2019, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the year ended December 31, 2017, the Adviser waived advisory fees of $54,344.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco a fee for costs incurred in providing accounting services and fund administrative services to the Fund and to reimburse Invesco for fees paid to insurance companies that have agreed to provide certain administrative services to the Fund. These administrative services provided by the insurance companies may include, among other things: maintenance of master accounts with the Fund; tracking, recording and transmitting net purchase and redemption orders for Fund shares; maintaining and preserving records related to the purchase, redemption and other account activity of variable product owners; distributing copies of Fund documents such as prospectuses, proxy materials and periodic reports, to variable product owners, and responding to inquiries from variable product owners about the Fund. Pursuant to such agreement, for the year ended December 31, 2017, Invesco was paid $398,560 for accounting and fund administrative services and was reimbursed $2,749,572 for fees paid to insurance companies.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (IIS) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. For the year ended December 31, 2017, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
The Trust has entered into a master distribution agreement with Invesco Distributors, Inc. (IDI) to serve as the distributor for the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Funds Series II shares (the Plan). The Fund, pursuant to the Plan, pays IDI compensation at the annual rate of 0.25% of the Funds average daily net assets of Series II shares. The fees are accrued daily and paid monthly. Of the Plan payments, up to 0.25% of the average daily net assets of the Series II shares may be paid to insurance companies who furnish continuing personal shareholder services to customers who purchase and own Series II shares of the Fund. For the year ended December 31, 2017, expenses incurred under the Plan are detailed in the Statement of Operations as Distribution fees.
For the year ended December 31, 2017, the Fund incurred $30,219 in brokerage commissions with Invesco Capital Markets, Inc., an affiliate of the Adviser and IDI, for portfolio transactions executed on behalf of the Fund.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
NOTE 3Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investments assigned level:
Level 1 | Prices are determined using quoted prices in an active market for identical assets. |
Level 2 | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Level 3 | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Funds own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of December 31, 2017. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
Invesco V.I. Comstock Fund
The Funds policy is to recognize transfers in and out of the valuation levels as of the end of the reporting period. During the year ended December 31, 2017, there were no material transfers between valuation levels.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Investments in Securities | ||||||||||||||||
Common Stocks & Other Equity Interests |
$ | 1,786,636,973 | $ | 48,233,625 | $ | | $ | 1,834,870,598 | ||||||||
Money Market Funds |
91,511,470 | | | 91,511,470 | ||||||||||||
Total Investments in Securities |
1,878,148,443 | 48,233,625 | | 1,926,382,068 | ||||||||||||
Other Investments Liabilities* | ||||||||||||||||
Forward Foreign Currency Contracts |
| (3,129,086 | ) | | (3,129,086 | ) | ||||||||||
Total Investments |
$ | 1,878,148,443 | $ | 45,104,539 | $ | | $ | 1,923,252,982 |
* | Unrealized appreciation (depreciation). |
NOTE 4Derivative Investments
The Fund may enter into an International Swaps and Derivatives Association Master Agreement (ISDA Master Agreement) under which a fund may trade OTC derivatives. An OTC transaction entered into under an ISDA Master Agreement typically involves a collateral posting arrangement, payment netting provisions and close-out netting provisions. These netting provisions allow for reduction of credit risk through netting of contractual obligations. The enforceability of the netting provisions of the ISDA Master Agreement depends on the governing law of the ISDA Master Agreement, among other factors.
For financial reporting purposes, the Fund does not offset OTC derivative assets or liabilities that are subject to ISDA Master Agreements in the Statement of Assets and Liabilities.
Value of Derivative Investments at Period-End
The table below summarizes the value of the Funds derivative investments, detailed by primary risk exposure, held as of December 31, 2017:
Value | ||||
Derivative Liabilities | Currency Risk |
|||
Unrealized depreciation on forward foreign currency contracts outstanding |
$ | (3,129,086 | ) | |
Derivatives not subject to master netting agreements |
| |||
Total Derivative Liabilities subject to master netting agreements |
$ | (3,129,086 | ) |
Offsetting Assets and Liabilities
The table below reflects the Funds exposure to Counterparties subject to either an ISDA Master Agreement or other agreement for OTC derivative transactions as of December 31, 2017.
Financial Derivative Assets |
Financial Derivative Liabilities |
Collateral (Received)/Pledged | ||||||||||||||||||||||
Counterparty | Forward Foreign Currency Contracts |
Forward Foreign Currency Contracts |
Net Value of Derivatives |
Non-Cash | Cash | Net Amount |
||||||||||||||||||
Barclays Bank PLC |
$ | | $ | (498,793 | ) | $ | (498,793 | ) | $ | | $ | | $ | (498,793 | ) | |||||||||
CIBC World Markets Corp. |
| (270,502 | ) | (270,502 | ) | | | (270,502 | ) | |||||||||||||||
Deutsche Bank Securities Inc. |
| (519,764 | ) | (519,764 | ) | | | (519,764 | ) | |||||||||||||||
Goldman Sachs International |
| (456,024 | ) | (456,024 | ) | | | (456,024 | ) | |||||||||||||||
JPMorgan Chase Bank, N.A. |
| (643,683 | ) | (643,683 | ) | | | (643,683 | ) | |||||||||||||||
RBC Capital Markets Corp. |
| (740,320 | ) | (740,320 | ) | | | (740,320 | ) | |||||||||||||||
Total |
$ | | $ | (3,129,086 | ) | $ | (3,129,086 | ) | $ | | $ | | $ | (3,129,086 | ) |
Effect of Derivative Investments for the year ended December 31, 2017
The table below summarizes the gains (losses) on derivative investments, detailed by primary risk exposure, recognized in earnings during the period:
Location of Gain (Loss) on Statement of Operations |
||||
Currency Risk |
||||
Realized Gain (Loss): |
||||
Forward foreign currency contracts |
$ | (8,866,170 | ) | |
Change in Net Unrealized Appreciation (Depreciation): |
||||
Forward foreign currency contracts |
(6,116,444 | ) | ||
Total |
$ | (14,982,614 | ) |
Invesco V.I. Comstock Fund
The table below summarizes the average notional value of forward foreign currency contracts outstanding during the period.
Forward Foreign Currency |
||||
Average notional value |
$ | 184,530,405 |
NOTE 5Trustees and Officers Fees and Benefits
Trustees and Officers Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees and Officers Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees were eligible to participate in a retirement plan that provided for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees and Officers Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 6Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period-end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 7Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended December 31, 2017 and 2016:
2017 | 2016 | |||||||
Ordinary income |
$ | 47,708,517 | $ | 38,036,033 | ||||
Long-term capital gain |
67,993,317 | 132,008,131 | ||||||
Total distributions |
$ | 115,701,834 | $ | 170,044,164 |
Tax Components of Net Assets at Period-End:
2017 | ||||
Undistributed ordinary income |
$ | 23,569,551 | ||
Undistributed long-term gain |
149,494,946 | |||
Net unrealized appreciation investments |
393,253,871 | |||
Net unrealized appreciation foreign currencies |
12,561 | |||
Temporary book/tax differences |
(207,687 | ) | ||
Shares of beneficial interest |
1,347,808,595 | |||
Total net assets |
$ | 1,913,931,837 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Funds net unrealized appreciation difference is attributable primarily to wash sales and forward foreign currency contracts.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Funds temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund does not have a capital loss carryforward as of December 31, 2017.
NOTE 8Investment Transactions
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended December 31, 2017 was $243,835,055 and $637,013,315, respectively. Cost of investments, including any derivatives, on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end.
Invesco V.I. Comstock Fund
Unrealized Appreciation (Depreciation) of Investments on a Tax Basis | ||||
Aggregate unrealized appreciation of investments |
$ | 472,054,891 | ||
Aggregate unrealized (depreciation) of investments |
(78,801,020 | ) | ||
Net unrealized appreciation of investments |
$ | 393,253,871 | ||
Cost of investments for tax purposes is $1,529,999,111. |
NOTE 9Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of foreign currency transactions, on December 31, 2017, undistributed net investment income was increased by $46,727 and undistributed net realized gain was decreased by $46,727. This reclassification had no effect on the net assets of the Fund.
NOTE 10Share Information
Summary of Share Activity | ||||||||||||||||
Years ended December 31, | ||||||||||||||||
2017(a) | 2016 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: |
||||||||||||||||
Series I |
618,922 | $ | 11,976,966 | 1,383,440 | $ | 23,426,576 | ||||||||||
Series II |
2,755,173 | 52,626,539 | 9,559,621 | 166,299,943 | ||||||||||||
Issued as reinvestment of dividends: |
||||||||||||||||
Series I |
863,093 | 16,364,250 | 1,332,508 | 22,492,723 | ||||||||||||
Series II |
5,255,957 | 99,337,584 | 8,772,380 | 147,551,441 | ||||||||||||
Reacquired: |
||||||||||||||||
Series I |
(2,062,592 | ) | (39,914,568 | ) | (7,929,844 | ) | (138,107,405 | ) | ||||||||
Series II |
(18,238,937 | ) | (350,012,824 | ) | (16,614,390 | ) | (291,552,364 | ) | ||||||||
Net increase (decrease) in share activity |
(10,808,384 | ) | $ | (209,622,053 | ) | (3,496,285 | ) | $ | (69,889,086 | ) |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 54% of the outstanding shares of the Fund. The Fund and the Funds principal underwriter or adviser, are parties to participation agreements with these entities whereby these entities sell units of interest in separate accounts funding variable products that are invested in the Fund. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
NOTE 11Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Net asset value, beginning of period |
Net investment income(a) |
Net gains (losses) on securities (both realized and unrealized) |
Total from investment operations |
Dividends from net investment income |
Distributions from net realized gains |
Total distributions |
Net asset value, end of period |
Total return(b) |
Net assets, end of period (000s omitted) |
Ratio of expenses to average net assets with fee waivers and/or expenses absorbed |
Ratio
of expenses to average net assets without fee waivers and/or expenses absorbed |
Ratio of net investment income to average net assets |
Portfolio turnover(c) |
|||||||||||||||||||||||||||||||||||||||||||
Series I |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/17 |
$ | 18.69 | $ | 0.28 | $ | 2.94 | $ | 3.22 | $ | (0.44 | ) | $ | (0.85 | ) | $ | (1.29 | ) | $ | 20.62 | 17.85 | % | $ | 270,651 | 0.75 | %(d) | 0.75 | %(d) | 1.47 | %(d) | 13 | % | |||||||||||||||||||||||||
Year ended 12/31/16 |
17.57 | 0.38 | 2.47 | 2.85 | (0.29 | ) | (1.44 | ) | (1.73 | ) | 18.69 | 17.30 | 256,080 | 0.77 | 0.78 | 2.20 | 21 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 |
19.16 | 0.28 | (1.45 | ) | (1.17 | ) | (0.37 | ) | (0.05 | ) | (0.42 | ) | 17.57 | (5.98 | ) | 332,411 | 0.78 | 0.83 | 1.52 | 16 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 |
17.75 | 0.32 | 1.34 | 1.66 | (0.25 | ) | | (0.25 | ) | 19.16 | 9.39 | 338,159 | 0.78 | 0.83 | 1.73 | 19 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 |
13.27 | 0.22 | 4.53 | 4.75 | (0.27 | ) | | (0.27 | ) | 17.75 | 35.97 | 311,837 | 0.76 | 0.84 | 1.36 | 11 | ||||||||||||||||||||||||||||||||||||||||
Series II |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/17 |
18.62 | 0.23 | 2.93 | 3.16 | (0.39 | ) | (0.85 | ) | (1.24 | ) | 20.54 | 17.58 | 1,643,281 | 1.00 | (d) | 1.00 | (d) | 1.22 | (d) | 13 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/16 |
17.51 | 0.34 | 2.45 | 2.79 | (0.24 | ) | (1.44 | ) | (1.68 | ) | 18.62 | 16.99 | 1,679,769 | 1.02 | 1.03 | 1.95 | 21 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 |
19.08 | 0.24 | (1.44 | ) | (1.20 | ) | (0.32 | ) | (0.05 | ) | (0.37 | ) | 17.51 | (6.19 | ) | 1,549,679 | 1.03 | 1.08 | 1.27 | 16 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 |
17.68 | 0.27 | 1.33 | 1.60 | (0.20 | ) | | (0.20 | ) | 19.08 | 9.10 | 1,840,794 | 1.03 | 1.08 | 1.48 | 19 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 |
13.22 | 0.17 | 4.52 | 4.69 | (0.23 | ) | | (0.23 | ) | 17.68 | 35.65 | 1,916,026 | 1.01 | 1.09 | 1.11 | 11 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year, if applicable, and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns. |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. |
(d) | Ratios are based on average daily net assets (000s omitted) of $255,140 and $1,618,401 for Series I and Series II shares, respectively. |
Invesco V.I. Comstock Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) and Shareholders of Invesco V.I. Comstock Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Invesco V.I. Comstock Fund (one of the funds constituting AIM Variable Insurance Funds (Invesco Variable Insurance Funds), hereafter referred to as the Fund) as of December 31, 2017, the related statement of operations for the year ended December 31, 2017, the statement of changes in net assets for each of the two years in the period ended December 31, 2017, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2017 (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2017 and the financial highlights for each of the five years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Funds management. Our responsibility is to express an opinion on the Funds financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2017 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, TX
February 14, 2018
We have served as the auditor of one or more of the investment companies in the Invesco/PowerShares group of investment companies since at least 1995. We have not determined the specific year we began serving as auditor.
Invesco V.I. Comstock Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period July 1, 2017 through December 31, 2017.
The actual and hypothetical expenses in the examples below do not represent the effect of any fees or other expenses assessed in connection with a variable product; if they did, the expenses shown would be higher while the ending account values shown would be lower.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled Actual Expenses Paid During Period to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Funds actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs. Therefore, the hypothetical information is useful in comparing ongoing costs, and will not help you determine the relative total costs of owning different funds.
Beginning |
ACTUAL | HYPOTHETICAL (5% annual return before expenses) |
Annualized |
|||||||||||||||||||||
Class | Ending Account Value (12/31/17)1 |
Expenses Paid During Period2 |
Ending Account Value (12/31/17) |
Expenses Paid During Period2 |
||||||||||||||||||||
Series I |
$ | 1,000.00 | $ | 1,139.50 | $ | 4.04 | $ | 1,021.42 | $ | 3.82 | 0.75 | % | ||||||||||||
Series II |
1,000.00 | 1,138.50 | 5.39 | 1,020.16 | 5.09 | 1.00 |
1 | The actual ending account value is based on the actual total return of the Fund for the period July 1, 2017 through December 31, 2017, after actual expenses and will differ from the hypothetical ending account value which is based on the Funds expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Funds annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half year. |
Invesco V.I. Comstock Fund
Tax Information
Form 1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific states requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended December 31, 2017:
Federal and State Income Tax |
||||
Long-Term Capital Gain Distributions |
$ | 67,993,317 | ||
Corporate Dividends Received Deduction* |
87.82 | % | ||
U.S. Treasury Obligations* |
0.00 | % |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Funds fiscal year. |
Invesco V.I. Comstock Fund
Trustees and Officers
The address of each trustee and officer is AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Trust), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trusts organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 1960 Trustee |
2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business
Formerly: Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US), Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) |
158 | None | ||||
Philip A. Taylor2 1954 Trustee and Senior Vice President |
2006 | Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco Aim Management Group, Inc.) (financial services holding company); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.) (registered transfer agent); Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company); Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management).
Formerly: Co-Chairman, Co-President and Co-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chief Executive Officer and President, Van Kampen Exchange Corp; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurers Series Trust (Invesco Treasurers Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurers Series Trust (Invesco Treasurers Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) (registered broker dealer); Manager, Invesco PowerShares Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco Aim Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurers Series Trust (Invesco Treasurers Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. |
158 | None |
1 | Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser. |
2 | Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser. |
Invesco V.I. Comstock Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Independent Trustees | ||||||||
Bruce L. Crockett 1944 Trustee and Chair |
1993 | Chairman, Crockett Technologies Associates (technology consulting company)
Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute: Member of the Audit Committee, Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council |
158 | Director and Chairman of the Audit Committee, ALPS (Attorneys Liability Protection Society) (insurance company); Director and Member of the Audit Committee and Compensation Committee, Ferroglobe PLC (metallurgical company) | ||||
David C. Arch 1945 Trustee |
2010 | Chairman of Blistex Inc. (consumer health care products manufacturer); Member, World Presidents Organization | 158 | Board member of the Illinois Manufacturers Association | ||||
Jack M. Fields 1952 Trustee |
1997 | Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Chairman, Discovery Learning Alliance (non-profit)
Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff) (human resources provider); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives |
158 | None | ||||
Cynthia Hostetler 1962 Trustee |
2017 | Non-Executive Director and Trustee of a number of public and private business corporations
Formerly: Head of Investment Funds and Private Equity, Overseas Private Investment Corporation; President, First Manhattan Bancorporation, Inc.; Attorney, Simpson Thacher & Bartlett LLP |
158 | Vulcan Materials Company (construction materials company); Trilinc Global Impact Fund; Aberdeen Investment Funds (4 portfolios); Artio Global Investment LLC (mutual fund complex); Edgen Group, Inc. (specialized energy and infrastructure products distributor) | ||||
Eli Jones 1961 Trustee |
2016 | Professor and Dean, Mays Business School Texas A&M University
Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University; Director, Arvest Bank |
158 | Insperity, Inc. (formerly known as Administaff) (human resources provider) | ||||
Prema Mathai-Davis 1950 Trustee |
1998 | Retired. | 158 | None | ||||
Teresa M. Ressel 1962 Trustee |
2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Chief Financial Officer, Olayan America, The Olayan Group (international investor/commercial/industrial); Chief Executive Officer, UBS Securities LLC; Group Chief Operating Officer, Americas, UBS AG; Assistant Secretary for Management & Budget and CFO, US Department of the Treasury |
158 | Atlantic Power Corporation (power generation company); ON Semiconductor Corp. (semiconductor supplier) | ||||
Ann Barnett Stern 1957 Trustee |
2017 | President and Chief Executive Officer, Houston Endowment Inc. (private philanthropic institution)
Formerly: Executive Vice President and General Counsel, Texas Childrens Hospital; Attorney, Beck, Redden and Secrest, LLP; Business Law Instructor, University of St. Thomas; Attorney, Andrews & Kurth LLP |
158 | Federal Reserve Bank of Dallas | ||||
Raymond Stickel, Jr. 1944 Trustee |
2005 | Retired.
Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios); Partner, Deloitte & Touche |
158 | None | ||||
Robert C. Troccoli 1949 Trustee |
2016 | Adjunct Professor, University of Denver Daniels College of Business
Formerly: Senior Partner, KPMG LLP |
158 | None | ||||
Christopher L. Wilson 1957 Trustee |
2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Managing Partner, CT2, LLC (investing and consulting firm); President/Chief Executive Officer, Columbia Funds, Bank of America Corporation; President/Chief Executive Officer, CDC IXIS Asset Management Services, Inc.; Principal & Director of Operations, Scudder Funds, Scudder, Stevens & Clark, Inc.; Assistant Vice President, Fidelity Investments |
158 | TD Asset Management USA Inc. (mutual fund complex) (22 portfolios); ISO New England, Inc. (non-profit organization managing regional electricity market) |
Invesco V.I. Comstock Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers | ||||||||
Sheri Morris 1964 President, Principal Executive Officer and Treasurer |
1999 | President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco Aim Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; and Treasurer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust and PowerShares Actively Managed Exchange-Traded Fund Trust |
N/A | N/A | ||||
Russell C. Burk 1958 Senior Vice President and Senior Officer |
2005 | Senior Vice President and Senior Officer, The Invesco Funds | N/A | N/A | ||||
John M. Zerr 1962 Senior Vice President, Chief Legal Officer and Secretary |
2006 | Director, Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Managing Director, Invesco PowerShares Capital Management LLC; Director, Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust; Manager and Secretary, Invesco Indexing LLC
Formerly: Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser); Vice President and Secretary, PBHG Funds (an investment company) and PBHG Insurance Series Fund (an investment company); Chief Operating Officer, General Counsel and Secretary, Old Mutual Investment Partners (a broker-dealer); General Counsel and Secretary, Old Mutual Fund Services (an administrator) and Old Mutual Shareholder Services (a shareholder servicing center); Executive Vice President, General Counsel and Secretary, Old Mutual Capital, Inc. (an investment adviser); and Vice President and Secretary, Old Mutual Advisors Funds (an investment company) |
N/A | N/A | ||||
Gregory G. McGreevey 1962 Senior Vice President |
2012 | Senior Managing Director, Invesco Ltd.; Director, Chairman, President, and Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President, Invesco Management Group, Inc.; Director, Invesco Mortgage Capital, Inc. and Invesco Senior Secured Management, Inc.; and Senior Vice President, The Invesco Funds
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A | ||||
Kelli Gallegos 1970 Vice President, Principal Financial Officer and Assistant Treasurer |
2008 | Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A |
Invesco V.I. Comstock Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers(continued) | ||||||||
Tracy Sullivan 1962 Vice President, Chief Tax Officer and Assistant Treasurer |
2008 | Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A | ||||
Crissie M. Wisdom 1969 Anti-Money Laundering Compliance Officer |
2013 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., Invesco Management Group, Inc., The Invesco Funds, and PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp. |
N/A | N/A | ||||
Robert R. Leveille 1969 Chief Compliance Officer |
2016 | Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds
Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds |
N/A | N/A |
The Statement of Additional Information of the Trust includes additional information about the Funds Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Funds Statement of Additional Information for information on the Funds sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 |
Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Auditors PricewaterhouseCoopers LLP 1000 Louisiana Street, Suite 5800 Houston, TX 77002-5678 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2005 Market Street, Suite 2600 Philadelphia, PA 19103-7018 |
Counsel to the Independent Trustees Goodwin Procter LLP 901 New York Avenue, N.W. Washington, D.C. 20001 |
Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
Invesco V.I. Comstock Fund
| ||||
Annual Report to Shareholders
|
December 31, 2017 | |||
| ||||
Invesco V.I. Core Equity Fund
|
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Funds semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The Funds Form N-Q filings are available on the SEC website, sec.gov. Copies of the Funds Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-07452 and 033-57340. The Funds most recent portfolio holdings, as filed on Form N-Q, have also been made available to insurance companies issuing variable annuity contracts and variable life insurance policies (variable products) that invest in the Fund. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/ proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
This report must be accompanied or preceded by a currently effective Fund prospectus and variable product prospectus, which contain more complete information, including sales charges and expenses. Investors should read each carefully before investing.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
Invesco Distributors, Inc. |
VICEQ-AR-1 |
02072018 1419 |
Managements Discussion of Fund Performance
Invesco V.I. Core Equity Fund
Invesco V.I. Core Equity Fund
Your Funds Long-Term Performance
Results of a $10,000 Investment Oldest Share Class(es)
Fund and index data from 12/31/07
1 | Source: FactSet Research Systems Inc. |
2 | Source: Lipper Inc. |
Past performance cannot guarantee
comparable future results.
Invesco V.I. Core Equity Fund
Invesco V.I. Core Equity Funds investment objective is long-term growth of capital.
∎ | Unless otherwise stated, information presented in this report is as of December 31, 2017, and is based on total net assets. |
∎ | Unless otherwise noted, all data provided by Invesco. |
Invesco V.I. Core Equity Fund
Invesco V.I. Core Equity Fund
Schedule of Investments(a)
December 31, 2017
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Core Equity Fund
Investment Abbreviations:
ADR | American Depositary Receipt |
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poors. |
(b) | Non-income producing security. |
(c) | The money market fund and the Fund are affiliated by having the same investment adviser. The rate shown is the 7-day SEC standardized yield as of December 31, 2017. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Core Equity Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Core Equity Fund
Statement of Changes in Net Assets
For the years ended December 31, 2017 and 2016
2017 | 2016 | |||||||
Operations: |
||||||||
Net investment income |
$ | 8,746,855 | $ | 12,378,633 | ||||
Net realized gain |
63,198,866 | 63,806,796 | ||||||
Change in net unrealized appreciation |
80,767,444 | 35,541,249 | ||||||
Net increase in net assets resulting from operations |
152,713,165 | 111,726,678 | ||||||
Distributions to shareholders from net investment income: |
||||||||
Series I |
(10,820,715 | ) | (7,743,417 | ) | ||||
Series ll |
(1,482,765 | ) | (879,585 | ) | ||||
Total distributions from net investment income |
(12,303,480 | ) | (8,623,002 | ) | ||||
Distributions to shareholders from net realized gains: |
||||||||
Series l |
(54,200,882 | ) | (69,406,591 | ) | ||||
Series ll |
(9,654,814 | ) | (12,096,765 | ) | ||||
Total distributions from net realized gains |
(63,855,696 | ) | (81,503,356 | ) | ||||
Share transactionsnet: |
||||||||
Series l |
(44,176,644 | ) | 94,841,524 | |||||
Series ll |
(888,493 | ) | (2,788,171 | ) | ||||
Net increase (decrease) in net assets resulting from share transactions |
(45,065,137 | ) | 92,053,353 | |||||
Net increase in net assets |
31,488,852 | 113,653,673 | ||||||
Net assets: |
||||||||
Beginning of year |
1,213,295,926 | 1,099,642,253 | ||||||
End of year (includes undistributed net investment income of $8,498,127 and $11,825,531, respectively) |
$ | 1,244,784,778 | $ | 1,213,295,926 |
Notes to Financial Statements
December 31, 2017
NOTE 1Significant Accounting Policies
Invesco V.I. Core Equity Fund (the Fund) is a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Trust). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end series management investment company consisting of twenty-four separate portfolios, (each constituting a Fund). The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each Fund or class will be voted on exclusively by the shareholders of such Fund or class. Current Securities and Exchange Commission (SEC) guidance, however, requires participating insurance companies offering separate accounts to vote shares proportionally in accordance with the instructions of the contract owners whose investments are funded by shares of each Fund or class.
The Funds investment objective is long-term growth of capital.
The Fund currently offers two classes of shares, Series I and Series II, both of which are offered to insurance company separate accounts funding variable annuity contracts and variable life insurance policies (variable products).
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946, Financial Services Investment Companies.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations Securities, including restricted securities, are valued according to the following policy. |
A security listed or traded on an exchange (except convertible securities) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and asked prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and asked prices. For purposes of determining net asset value (NAV) per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (NYSE).
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end-of-day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
Invesco V.I. Core Equity Fund
Debt obligations (including convertible securities) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual trading characteristics and other market data. Pricing services generally value debt obligations assuming orderly transactions of institutional round lot size, but a fund may hold or transact in the same securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Foreign securities (including foreign exchange contracts) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that the investment adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trusts officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/asked quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a securitys fair value.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuers assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
B. | Securities Transactions and Investment Income Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any) is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Funds net asset value and, accordingly, they reduce the Funds total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and the Statement of Changes in Net Assets, or the net investment income per share and the ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. | Country Determination For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuers securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
D. | Distributions Distributions from net investment income and net realized capital gain, if any, are generally declared and paid to separate accounts of participating insurance companies annually and recorded on the ex-dividend date. |
E. | Federal Income Taxes The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the Internal Revenue Code), necessary to qualify as a regulated investment company and to distribute substantially all of the Funds taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. |
Invesco V.I. Core Equity Fund
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Funds uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
F. | Expenses Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
G. | Accounting Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
H. | Indemnifications Under the Trusts organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Funds servicing agreements, that contain a variety of indemnification clauses. The Funds maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
I. | Foreign Currency Translations Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Funds books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. |
The Fund may invest in foreign securities, which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests and are shown in the Statement of Operations.
J. | Forward Foreign Currency Contracts The Fund may engage in foreign currency transactions either on a spot (i.e. for prompt delivery and settlement) basis, or through forward foreign currency contracts, to manage or minimize currency or exchange rate risk. |
The Fund may also enter into forward foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to lock in the U.S. dollar price of that security, or the Fund may also enter into forward foreign currency contracts that do not provide for physical settlement of the two currencies, but instead are settled by a single cash payment calculated as the difference between the agreed upon exchange rate and the spot rate at settlement based upon an agreed upon notional amount (non-deliverable forwards). The Fund will set aside liquid assets in an amount equal to the daily mark-to-market obligation for forward foreign currency contracts.
A forward foreign currency contract is an obligation between two parties (Counterparties) to purchase or sell a specific currency for an agreed-upon price at a future date. The use of forward foreign currency contracts does not eliminate fluctuations in the price of the underlying securities the Fund owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statement of Operations. The primary risks associated with forward foreign currency contracts include failure of the Counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities.
NOTE 2Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the Adviser or Invesco). Under the terms of the investment advisory agreement, the Fund accrues daily and pays monthly an advisory fee to the Adviser based on the annual rate of the Funds average daily net assets as follows:
Average Daily Net Assets | Rate | |||
First $250 million |
0.65% | |||
Over $250 million |
0.60% |
For the year ended December 31, 2017, the effective advisory fees incurred by the Fund was 0.61%.
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. and separate sub-advisory agreements with Invesco PowerShares Capital Management LLC and Invesco Asset Management (India) Private Limited (collectively, the Affiliated Sub-Advisers) the Adviser, not the Fund, will pay 40% of the fees paid to the Adviser to any such
Invesco V.I. Core Equity Fund
Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2018, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Series I shares to 2.00% and Series II shares to 2.25% of average daily net assets (the expense limits). In determining the Advisers obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on June 30, 2018. During its term, the fee waiver agreement cannot be terminated or amended to increase the expense limits or reduce the advisory fee waiver without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
Further, the Adviser has contractually agreed, through at least June 30, 2019, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the year ended December 31, 2017, the Adviser waived advisory fees of $155,469.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco a fee for costs incurred in providing accounting services and fund administrative services to the Fund and to reimburse Invesco for fees paid to insurance companies that have agreed to provide certain administrative services to the Fund. These administrative services provided by the insurance companies may include, among other things: maintenance of master accounts with the Fund; tracking, recording and transmitting net purchase and redemption orders for Fund shares; maintaining and preserving records related to the purchase, redemption and other account activity of variable product owners; distributing copies of Fund documents such as prospectuses, proxy materials and periodic reports, to variable product owners, and responding to inquiries from variable product owners about the Fund. Pursuant to such agreement, for the year ended December 31, 2017, Invesco was paid $289,924 for accounting and fund administrative services and was reimbursed $1,714,275 for fees paid to insurance companies.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (IIS) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. For the year ended December 31, 2017, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
The Trust has entered into a master distribution agreement with Invesco Distributors, Inc. (IDI) to serve as the distributor for the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Funds Series II shares (the Plan). The Fund, pursuant to the Plan, pays IDI compensation at the annual rate of 0.25% of the Funds average daily net assets of Series II shares. The fees are accrued daily and paid monthly. Of the Plan payments, up to 0.25% of the average daily net assets of the Series II shares may be paid to insurance companies who furnish continuing personal shareholder services to customers who purchase and own Series II shares of the Fund. For the year ended December 31, 2017, expenses incurred under the Plan are detailed in the Statement of Operations as Distribution fees .
For the year ended December 31, 2017, the Fund incurred $503 in brokerage commissions with Invesco Capital Markets, Inc., an affiliate of the Adviser and IDI, for portfolio transactions executed on behalf of the Fund.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
NOTE 3Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investments assigned level:
Level 1 | Prices are determined using quoted prices in an active market for identical assets. |
Level 2 | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Level 3 | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Funds own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of December 31, 2017. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
The Funds policy is to recognize transfers in and out of the valuation levels as of the end of the reporting period. During the year ended December 31, 2017, there were transfers from Level 1 to Level 2 of $14,785,906 and from Level 2 to Level 1 of $36,506,548, due to foreign fair value adjustments.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Investments in Securities | ||||||||||||||||
Common Stocks & Other Equity Interests |
$ | 946,594,501 | $ | 135,001,371 | $ | | $ | 1,081,595,872 | ||||||||
Money Market Funds |
135,888,617 | | | 135,888,617 | ||||||||||||
Total Investments |
$ | 1,082,483,118 | $ | 135,001,371 | $ | | $ | 1,217,484,489 |
Invesco V.I. Core Equity Fund
NOTE 4Security Transactions with Affiliated Funds
The Fund is permitted to purchase or sell securities from or to certain other Invesco Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment adviser (or affiliated investment advisers), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, for the year ended December 31, 2017, the Fund engaged in securities sales of $493,229 which resulted in net realized gains (losses) of $(197,609).
NOTE 5Trustees and Officers Fees and Benefits
Trustees and Officers Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees and Officers Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees were eligible to participate in a retirement plan that provided for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees and Officers Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 6Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period-end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian . To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 7Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended December 31, 2017 and 2016:
2017 | 2016 | |||||||
Ordinary income |
$ | 13,761,073 | $ | 8,623,002 | ||||
Long-term capital gain |
62,398,103 | 81,503,356 | ||||||
Total distributions |
$ | 76,159,176 | $ | 90,126,358 |
Tax Components of Net Assets at Period-End:
2017 | ||||
Undistributed ordinary income |
$ | 8,933,488 | ||
Undistributed long-term gain |
62,376,136 | |||
Net unrealized appreciation investments |
301,365,822 | |||
Net unrealized appreciation foreign currencies |
935,733 | |||
Temporary book/tax differences |
(435,361 | ) | ||
Shares of beneficial interest |
871,608,960 | |||
Total net assets |
$ | 1,244,784,778 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Funds net unrealized appreciation difference is attributable primarily to wash sales.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Funds temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund does not have a capital loss carryforward as of December 31, 2017.
Invesco V.I. Core Equity Fund
NOTE 8Investment Transactions
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended December 31, 2017 was $325,858,254 and $499,929,363, respectively. Cost of investments, including any derivatives, on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investments on a Tax Basis | ||||
Aggregate unrealized appreciation of investments |
$ | 333,049,837 | ||
Aggregate unrealized (depreciation) of investments |
(31,684,015 | ) | ||
Net unrealized appreciation of investments |
$ | 301,365,822 |
Cost of investments for tax purposes is $916,118,667.
NOTE 9Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of foreign currency transactions, on December 31, 2017, undistributed net investment income was increased by $229,221 and undistributed net realized gain was decreased by $229,221. This reclassification had no effect on the net assets of the Fund.
NOTE 10Share Information
Summary of Share Activity | ||||||||||||||||
Years ended December 31, | ||||||||||||||||
2017(a) | 2016 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: |
||||||||||||||||
Series I |
1,051,421 | $ | 37,861,752 | 4,633,218 | $ | 163,930,451 | ||||||||||
Series II |
212,324 | 7,514,897 | 229,629 | 7,596,362 | ||||||||||||
Issued as reinvestment of dividends: |
||||||||||||||||
Series I |
1,829,018 | 65,021,597 | 2,245,997 | 77,150,008 | ||||||||||||
Series II |
317,853 | 11,137,579 | 382,783 | 12,976,350 | ||||||||||||
Reacquired: |
||||||||||||||||
Series I |
(4,043,650 | ) | (147,059,993 | ) | (4,224,160 | ) | (146,238,935 | ) | ||||||||
Series II |
(544,318 | ) | (19,540,969 | ) | (680,023 | ) | (23,360,883 | ) | ||||||||
Net increase (decrease) in share activity |
(1,177,352 | ) | $ | (45,065,137 | ) | 2,587,444 | $ | 92,053,353 |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 57% of the outstanding shares of the Fund. The Fund and the Funds principal underwriter or adviser, are parties to participation agreements with these entities whereby these entities sell units of interest in separate accounts funding variable products that are invested in the Fund. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
Invesco V.I. Core Equity Fund
NOTE 11Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Net asset value, beginning of period |
Net investment income(a) |
Net gains (losses) on securities (both realized and unrealized) |
Total from investment operations |
Dividends from net investment income |
Distributions from net realized gains |
Total distributions |
Net asset value, end of period |
Total return(b) |
Net assets, end of period (000s omitted) |
Ratio of expenses to average net assets with fee waivers and/or expenses absorbed |
Ratio of expenses to average net assets without fee waivers and/or expenses absorbed |
Ratio of net investment income to average net assets |
Portfolio turnover(c) |
|||||||||||||||||||||||||||||||||||||||||||
Series I |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/17 |
$ | 34.58 | $ | 0.27 | $ | 4.21 | $ | 4.48 | $ | (0.39 | ) | $ | (1.95 | ) | $ | (2.34 | ) | $ | 36.72 | 13.17 | % | $ | 1,054,802 | 0.79 | %(d) | 0.80 | %(d) | 0.74 | %(d) | 30 | % | |||||||||||||||||||||||||
Year ended 12/31/16 |
33.84 | 0.39 | 3.07 | 3.46 | (0.28 | ) | (2.44 | ) | (2.72 | ) | 34.58 | 10.26 | 1,033,700 | 0.84 | 0.85 | 1.11 | 38 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 |
41.00 | 0.32 | (2.79 | ) | (2.47 | ) | (0.46 | ) | (4.23 | ) | (4.69 | ) | 33.84 | (5.75 | ) | 921,516 | 0.89 | 0.90 | 0.81 | 45 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 |
38.43 | 0.40 | 2.72 | 3.12 | (0.35 | ) | (0.20 | ) | (0.55 | ) | 41.00 | 8.12 | 1,096,219 | 0.88 | 0.90 | 1.01 | 35 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 |
30.14 | 0.31 | 8.47 | 8.78 | (0.49 | ) | | (0.49 | ) | 38.43 | 29.25 | 1,167,023 | 0.88 | 0.90 | 0.89 | 25 | ||||||||||||||||||||||||||||||||||||||||
Series II |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/17 |
34.11 | 0.18 | 4.14 | 4.32 | (0.30 | ) | (1.95 | ) | (2.25 | ) | 36.18 | 12.87 | 189,982 | 1.04 | (d) | 1.05 | (d) | 0.49 | (d) | 30 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/16 |
33.40 | 0.30 | 3.03 | 3.33 | (0.18 | ) | (2.44 | ) | (2.62 | ) | 34.11 | 10.02 | 179,596 | 1.09 | 1.10 | 0.86 | 38 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 |
40.53 | 0.22 | (2.75 | ) | (2.53 | ) | (0.37 | ) | (4.23 | ) | (4.60 | ) | 33.40 | (5.98 | ) | 178,126 | 1.14 | 1.15 | 0.56 | 45 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 |
38.03 | 0.30 | 2.67 | 2.97 | (0.27 | ) | (0.20 | ) | (0.47 | ) | 40.53 | 7.82 | 185,406 | 1.13 | 1.15 | 0.76 | 35 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 |
29.86 | 0.22 | 8.39 | 8.61 | (0.44 | ) | | (0.44 | ) | 38.03 | 28.94 | 158,700 | 1.13 | 1.15 | 0.64 | 25 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year, if applicable, and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns. |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. |
(d) | Ratios are based on average daily net assets (000s omitted) of $1,053,675 and $185,126 for Series I and Series II shares, respectively. |
Invesco V.I. Core Equity Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
and Shareholders of Invesco V.I. Core Equity Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Invesco V.I. Core Equity Fund (one of the funds constituting AIM Variable Insurance Funds (Invesco Variable Insurance Funds), hereafter referred to as the Fund) as of December 31, 2017, the related statement of operations for the year ended December 31, 2017, the statement of changes in net assets for each of the two years in the period ended December 31, 2017, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2017 (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2017 and the financial highlights for each of the five years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Funds management. Our responsibility is to express an opinion on the Funds financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2017 by correspondence with the custodian and transfer agent. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, TX
February 14, 2018
We have served as the auditor of one or more of the investment companies in the Invesco/PowerShares group of investment companies since at least 1995. We have not determined the specific year we began serving as auditor.
Invesco V.I. Core Equity Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period July 1, 2017 through December 31, 2017.
The actual and hypothetical expenses in the examples below do not represent the effect of any fees or other expenses assessed in connection with a variable product; if they did, the expenses shown would be higher while the ending account values shown would be lower.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled Actual Expenses Paid During Period to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Funds actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs. Therefore, the hypothetical information is useful in comparing ongoing costs, and will not help you determine the relative total costs of owning different funds.
Class | Beginning Account Value (07/01/17) |
ACTUAL | HYPOTHETICAL (5% annual return before expenses) |
Annualized Expense Ratio |
||||||||||||||||||||
Ending Account Value (12/31/17)1 |
Expenses Paid During Period2 |
Ending Account Value (12/31/17) |
Expenses Paid During Period2 |
|||||||||||||||||||||
Series I |
$ | 1,000.00 | $ | 1,050.00 | $ | 4.03 | $ | 1,021.27 | $ | 3.97 | 0.78 | % | ||||||||||||
Series II |
1,000.00 | 1,048.90 | 5.32 | 1,020.01 | 5.24 | 1.03 |
1 | The actual ending account value is based on the actual total return of the Fund for the period July 1, 2017 through December 31, 2017, after actual expenses and will differ from the hypothetical ending account value which is based on the Funds expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Funds annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half year. |
Invesco V.I. Core Equity Fund
Tax Information
Form 1099-DIV, Form 1042-S and other yearend tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific states requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended December 31, 2017:
Federal and State Income Tax |
||||
Long-Term Capital Gain Distributions |
$ | 62,398,103 | ||
Corporate Dividends Received Deduction* |
100.00 | % | ||
U.S. Treasury Obligations* |
0.00 | % |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Funds fiscal year. |
Invesco V.I. Core Equity Fund
Trustees and Officers
The address of each trustee and officer is AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Trust), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trusts organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 1960 Trustee |
2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business
Formerly: Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US), Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) |
158 | None | ||||
Philip A. Taylor2 1954 Trustee and Senior Vice President |
2006 | Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco Aim Management Group, Inc.) (financial services holding company); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.) (registered transfer agent); Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company); Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management).
Formerly: Co-Chairman, Co-President and Co-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chief Executive Officer and President, Van Kampen Exchange Corp; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurers Series Trust (Invesco Treasurers Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurers Series Trust (Invesco Treasurers Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) (registered broker dealer); Manager, Invesco PowerShares Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco Aim Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurers Series Trust (Invesco Treasurers Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. |
158 | None |
1 | Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser. |
2 | Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser. |
Invesco V.I. Core Equity Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Independent Trustees | ||||||||
Bruce L. Crockett 1944 Trustee and Chair |
1993 | Chairman, Crockett Technologies Associates (technology consulting company)
Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute: Member of the Audit Committee, Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council |
158 | Director and Chairman of the Audit Committee, ALPS (Attorneys Liability Protection Society) (insurance company); Director and Member of the Audit Committee and Compensation Committee, Ferroglobe PLC (metallurgical company) | ||||
David C. Arch 1945 Trustee |
2010 | Chairman of Blistex Inc. (consumer health care products manufacturer); Member, World Presidents Organization | 158 | Board member of the Illinois Manufacturers Association | ||||
Jack M. Fields 1952 Trustee |
1997 | Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Chairman, Discovery Learning Alliance (non-profit)
Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff) (human resources provider); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives |
158 | None | ||||
Cynthia Hostetler 1962 Trustee |
2017 | Non-Executive Director and Trustee of a number of public and private business corporations
Formerly: Head of Investment Funds and Private Equity, Overseas Private Investment Corporation; President, First Manhattan Bancorporation, Inc.; Attorney, Simpson Thacher & Bartlett LLP |
158 | Vulcan Materials Company (construction materials company); Trilinc Global Impact Fund; Aberdeen Investment Funds (4 portfolios); Artio Global Investment LLC (mutual fund complex); Edgen Group, Inc. (specialized energy and infrastructure products distributor) | ||||
Eli Jones 1961 Trustee |
2016 | Professor and Dean, Mays Business School Texas A&M University
Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University; Director, Arvest Bank |
158 | Insperity, Inc. (formerly known as Administaff) (human resources provider) | ||||
Prema Mathai-Davis 1950 Trustee |
1998 | Retired. | 158 | None | ||||
Teresa M. Ressel 1962 Trustee |
2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Chief Financial Officer, Olayan America, The Olayan Group (international investor/commercial/industrial); Chief Executive Officer, UBS Securities LLC; Group Chief Operating Officer, Americas, UBS AG; Assistant Secretary for Management & Budget and CFO, US Department of the Treasury |
158 | Atlantic Power Corporation (power generation company); ON Semiconductor Corp. (semiconductor supplier) | ||||
Ann Barnett Stern 1957 Trustee |
2017 | President and Chief Executive Officer, Houston Endowment Inc. (private philanthropic institution)
Formerly: Executive Vice President and General Counsel, Texas Childrens Hospital; Attorney, Beck, Redden and Secrest, LLP; Business Law Instructor, University of St. Thomas; Attorney, Andrews & Kurth LLP |
158 | Federal Reserve Bank of Dallas | ||||
Raymond Stickel, Jr. 1944 Trustee |
2005 | Retired.
Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios); Partner, Deloitte & Touche |
158 | None | ||||
Robert C. Troccoli 1949 Trustee |
2016 | Adjunct Professor, University of Denver Daniels College of Business
Formerly: Senior Partner, KPMG LLP |
158 | None | ||||
Christopher L. Wilson 1957 Trustee |
2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Managing Partner, CT2, LLC (investing and consulting firm); President/Chief Executive Officer, Columbia Funds, Bank of America Corporation; President/Chief Executive Officer, CDC IXIS Asset Management Services, Inc.; Principal & Director of Operations, Scudder Funds, Scudder, Stevens & Clark, Inc.; Assistant Vice President, Fidelity Investments |
158 | TD Asset Management USA Inc. (mutual fund complex) (22 portfolios); ISO New England, Inc. (non-profit organization managing regional electricity market) |
Invesco V.I. Core Equity Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers | ||||||||
Sheri Morris 1964 President, Principal Executive Officer and Treasurer |
1999 | President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco Aim Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; and Treasurer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust and PowerShares Actively Managed Exchange-Traded Fund Trust |
N/A | N/A | ||||
Russell C. Burk 1958 Senior Vice President and Senior Officer |
2005 | Senior Vice President and Senior Officer, The Invesco Funds | N/A | N/A | ||||
John M. Zerr 1962 Senior Vice President, Chief Legal Officer and Secretary |
2006 | Director, Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Managing Director, Invesco PowerShares Capital Management LLC; Director, Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust; Manager and Secretary, Invesco Indexing LLC
Formerly: Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser); Vice President and Secretary, PBHG Funds (an investment company) and PBHG Insurance Series Fund (an investment company); Chief Operating Officer, General Counsel and Secretary, Old Mutual Investment Partners (a broker-dealer); General Counsel and Secretary, Old Mutual Fund Services (an administrator) and Old Mutual Shareholder Services (a shareholder servicing center); Executive Vice President, General Counsel and Secretary, Old Mutual Capital, Inc. (an investment adviser); and Vice President and Secretary, Old Mutual Advisors Funds (an investment company) |
N/A | N/A | ||||
Gregory G. McGreevey 1962 Senior Vice President |
2012 | Senior Managing Director, Invesco Ltd.; Director, Chairman, President, and Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President, Invesco Management Group, Inc.; Director, Invesco Mortgage Capital, Inc. and Invesco Senior Secured Management, Inc.; and Senior Vice President, The Invesco Funds
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A | ||||
Kelli Gallegos 1970 Vice President, Principal Financial Officer and Assistant Treasurer |
2008 | Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A |
Invesco V.I. Core Equity Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers(continued) | ||||||||
Tracy Sullivan 1962 Vice President, Chief Tax Officer and Assistant Treasurer |
2008 | Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A | ||||
Crissie M. Wisdom 1969 Anti-Money Laundering Compliance Officer |
2013 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., Invesco Management Group, Inc., The Invesco Funds, and PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp. |
N/A | N/A | ||||
Robert R. Leveille 1969 Chief Compliance Officer |
2016 | Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds
Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds |
N/A | N/A |
The Statement of Additional Information of the Trust includes additional information about the Funds Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Funds Statement of Additional Information for information on the Funds sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 |
Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Auditors PricewaterhouseCoopers LLP 1000 Louisiana Street, Suite 5800 Houston, TX 77002-5678 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2005 Market Street, Suite 2600 Philadelphia, PA 19103-7018 |
Counsel to the Independent Trustees Goodwin Procter LLP 901 New York Avenue, N.W. Washington, D.C. 20001 |
Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
Invesco V.I. Core Equity Fund
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Annual Report to Shareholders
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December 31, 2017 | |||
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Invesco V.I. Core Plus Bond Fund
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The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Funds semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The Funds Form N-Q filings are available on the SEC website, sec.gov. Copies of the Funds Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-07452 and 033-57340. The Funds most recent portfolio holdings, as filed on Form N-Q, have also been made available to insurance companies issuing variable annuity contracts and variable life insurance policies (variable products) that invest in the Fund. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/ proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
This report must be accompanied or preceded by a currently effective Fund prospectus and variable product prospectus, which contain more complete information, including sales charges and expenses. Investors should read each carefully before investing.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE | ||
Invesco Distributors, Inc. VICPB-AR-1 02122018 1547 |
Managements Discussion of Fund Performance
Invesco V.I. Core Plus Bond Fund
Invesco V.I. Core Plus Bond Fund
Your Funds Long-Term Performance
Results of a $10,000 Investment Oldest Share Class(es)
Fund and index data from 12/31/07
1 | Source: FactSet Research Systems Inc. |
Past performance cannot guarantee comparable future results.
The Lipper VUF Core Plus Bond Fund Index is not shown on the chart as the index does not have 10 years of performance history.
Invesco V.I. Core Plus Bond Fund
Invesco V.I. Core Plus Bond Funds investment objective is total return, comprised of current income and capital appreciation.
∎ | Unless otherwise stated, information presented in this report is as of December 31, 2017, and is based on total net assets. |
∎ | Unless otherwise noted, all data provided by Invesco. |
Invesco V.I. Core Plus Bond Fund
Invesco V.I. Core Plus Bond Fund
Invesco V.I. Core Plus Bond Fund
Schedule of Investments(a)
December 31, 2017
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Core Plus Bond Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Core Plus Bond Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Core Plus Bond Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Core Plus Bond Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Core Plus Bond Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Core Plus Bond Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Core Plus Bond Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Core Plus Bond Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Core Plus Bond Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Core Plus Bond Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Core Plus Bond Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Core Plus Bond Fund
Investment Abbreviations:
Ctfs. | Certificates | |
Deb. | Debentures | |
Gtd. | Guaranteed | |
IO | Interest Only | |
Jr. | Junior | |
LIBOR | London Interbank Offered Rate | |
Pfd. | Preferred | |
PIK | Pay-in-Kind | |
RB | Revenue Bonds | |
REIT | Real Estate Investment Trust | |
REMICS | Real Estate Mortgage Investment Conduits | |
Sec. | Secured | |
Sr. | Senior | |
Sub. | Subordinated | |
TBA | To Be Announced | |
Unsec. | Unsecured | |
USD | U.S. Dollar |
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor's. |
(b) | Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended (the "1933 Act"). The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The aggregate value of these securities at December 31, 2017 was $5,381,408, which represented 26.32% of the Fund's Net Assets. |
(c) | Perpetual bond with no specified maturity date. |
(d) | All or a portion of this security is Pay-in-Kind. Pay-in-Kind securities pay interest income in the form of securities. |
(e) | Interest or dividend rate is redetermined periodically. Rate shown is the rate in effect on December 31, 2017. |
(f) | Interest rate is redetermined periodically based on the cash flows generated by the pool of assets backing the security, less any applicable fees. The rate shown is the rate in effect December 31, 2017. |
(g) | Security purchased on a forward commitment basis. This security is subject to dollar roll transactions. See Note 1M. |
(h) | Security traded on a discount basis. The interest rate shown represents the discount rate at the time of purchase by the Fund. |
(i) | All or a portion of the value was pledged as collateral to cover margin requirements for open futures contracts. See Note 1L. |
(j) | Variable rate senior loan interests are, at present, not readily marketable, not registered under the 1933 Act, and may be subject to contractual and legal restrictions on sale. Variable rate senior loan interests in the Fund's portfolio generally have variable rates which adjust to a base, such as the LIBOR, on set dates, typically every 30 days but not greater than one year; and/or have interest rates that float at a margin above a widely recognized base lending rate such as the Prime Rate of a designated U.S. bank. |
(k) | Non-income producing security acquired as part of the Adelphia Communications bankruptcy reorganization. |
(l) | Non-income producing security. |
(m) | The money market fund and the Fund are affiliated by having the same investment adviser. The rate shown is the 7-day SEC standardized yield as of December 31, 2017. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Core Plus Bond Fund
Open Futures Contracts | ||||||||||||||||||||
Number of Contracts |
Expiration Month |
Notional Value |
Value | Unrealized Appreciation (Depreciation) |
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Long Futures Contracts |
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U.S. Treasury 5 Year Notes |
11 | March-2018 | $ | 1,277,804 | $ | (2,865 | ) | $ | (2,865 | ) | ||||||||||
U.S. Treasury 10 Year Ultra Bonds |
2 | March-2018 | 267,125 | (1,167 | ) | (1,167 | ) | |||||||||||||
U.S. Treasury Long Bonds |
4 | March-2018 | 612,000 | (984 | ) | (984 | ) | |||||||||||||
Subtotal Long Futures Contracts |
(5,016 | ) | (5,016 | ) | ||||||||||||||||
Short Futures Contracts |
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U.S. Treasury 2 Year Notes |
6 | March-2018 | (1,284,656 | ) | 1,206 | 1,206 | ||||||||||||||
Total Futures Contracts Interest Rate Risk |
$ | (3,810 | ) | $ | (3,810 | ) |
Open Forward Foreign Currency Contracts-Currency Risk | ||||||||||||||||||||||
Settlement Date |
Contract to | Unrealized Appreciation (Depreciation) |
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Counterparty | Deliver | Receive | ||||||||||||||||||||
02/28/2018 |
Barclays Bank PLC | EUR | 101,288 | USD | 119,642 | $ | (2,322 | ) |
Abbreviations:
EUR | Euro | |
USD | U.S. Dollar |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Core Plus Bond Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Core Plus Bond Fund
Statement of Changes in Net Assets
For the years ended December 31, 2017 and 2016
2017 | 2016 | |||||||
Operations: |
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Net investment income |
$ | 609,394 | $ | 582,105 | ||||
Net realized gain |
195,564 | 97,505 | ||||||
Change in net unrealized appreciation |
201,684 | 338,816 | ||||||
Net increase in net assets resulting from operations |
1,006,642 | 1,018,426 | ||||||
Distributions to shareholders from net investment income: |
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Series I |
(647,374 | ) | (646,158 | ) | ||||
Series ll |
(3,900 | ) | (4,899 | ) | ||||
Total distributions from net investment income |
(651,274 | ) | (651,057 | ) | ||||
Share transactionsnet: |
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Series l |
4,488,700 | (463,972 | ) | |||||
Series ll |
(6,224 | ) | (35,515 | ) | ||||
Net increase (decrease) in net assets resulting from share transactions |
4,482,476 | (499,487 | ) | |||||
Net increase (decrease) in net assets |
4,837,844 | (132,118 | ) | |||||
Net assets: |
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Beginning of year |
15,611,083 | 15,743,201 | ||||||
End of year (includes undistributed net investment income of $562,630 and $555,060, respectively) |
$ | 20,448,927 | $ | 15,611,083 |
Notes to Financial Statements
December 31, 2017
NOTE 1Significant Accounting Policies
Invesco V.I. Core Plus Bond Fund (the Fund) is a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Trust). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end series management investment company consisting of twenty-four separate portfolios, (each constituting a Fund). The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each Fund or class will be voted on exclusively by the shareholders of such Fund or class. Current Securities and Exchange Commission (SEC) guidance, however, requires participating insurance companies offering separate accounts to vote shares proportionally in accordance with the instructions of the contract owners whose investments are funded by shares of each Fund or class.
The Funds investment objective is total return, comprised of current income and capital appreciation.
The Fund currently offers two classes of shares, Series I and Series II, both of which are offered to insurance company separate accounts funding variable annuity contracts and variable life insurance policies (variable products).
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946, Financial Services Investment Companies.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations Securities, including restricted securities, are valued according to the following policy. |
Debt obligations (including convertible securities) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual trading characteristics and other market data. Pricing services generally value debt obligations assuming orderly transactions of institutional round lot size, but a fund may hold or transact in the same securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
A security listed or traded on an exchange (except convertible securities) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and asked prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and asked prices. For purposes of determining net asset value (NAV) per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (NYSE).
Invesco V.I. Core Plus Bond Fund
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end-of-day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
Swap agreements are fair valued using an evaluated quote, if available, provided by an independent pricing service. Evaluated quotes provided by the pricing service are valued based on a model which may include end-of-day net present values, spreads, ratings, industry, company performance and returns of referenced assets. Centrally cleared swap agreements are valued at the daily settlement price determined by the relevant exchange or clearinghouse.
Foreign securities (including foreign exchange contracts) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that the investment adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trusts officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/asked quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a securitys fair value.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuers assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
B. | Securities Transactions and Investment Income Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any) is recorded on the accrual basis from settlement date. Bond premiums and discounts are amortized and/or accreted over the lives of the respective securities. Pay-in-kind interest income and non-cash dividend income received in the form of securities in-lieu of cash are recorded at the fair value of the securities received. Paydown gains and losses on mortgage and asset-backed securities are recorded as adjustments to interest income. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Funds net asset value and, accordingly, they reduce the Funds total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and the Statement of Changes in Net Assets, or the net investment income per share and the ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. | Country Determination For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuers securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
D. | Distributions Distributions from net investment income and net realized capital gain, if any, are generally declared and paid to separate accounts of participating insurance companies annually and recorded on the ex-dividend date. |
E. | Federal Income Taxes The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the Internal Revenue Code), necessary to qualify as a regulated investment company and to distribute substantially all of the Funds |
Invesco V.I. Core Plus Bond Fund
taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. |
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Funds uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
F. | Expenses Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
G. | Accounting Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
H. | Indemnifications Under the Trusts organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Funds servicing agreements, that contain a variety of indemnification clauses. The Funds maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
I. | Lower-Rated Securities The Fund may invest in lower-quality debt securities, i.e., junk bonds. Investments in lower-rated securities or unrated securities of comparable quality tend to be more sensitive to economic conditions than higher rated securities. Junk bonds involve a greater risk of default by the issuer because such securities are generally unsecured and are often subordinated to other creditors claims. |
J. | Foreign Currency Translations Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Funds books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. |
The Fund may invest in foreign securities, which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests and are shown in the Statement of Operations.
K. | Forward Foreign Currency Contracts The Fund may engage in foreign currency transactions either on a spot (i.e. for prompt delivery and settlement) basis, or through forward foreign currency contracts, to manage or minimize currency or exchange rate risk. |
The Fund may also enter into forward foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to lock in the U.S. dollar price of that security, or the Fund may also enter into forward foreign currency contracts that do not provide for physical settlement of the two currencies, but instead are settled by a single cash payment calculated as the difference between the agreed upon exchange rate and the spot rate at settlement based upon an agreed upon notional amount (non-deliverable forwards). The Fund will set aside liquid assets in an amount equal to the daily mark-to-market obligation for forward foreign currency contracts.
A forward foreign currency contract is an obligation between two parties (Counterparties) to purchase or sell a specific currency for an agreed-upon price at a future date. The use of forward foreign currency contracts does not eliminate fluctuations in the price of the underlying securities the Fund owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statement of Operations. The primary risks associated with forward foreign currency contracts include failure of the Counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities.
L. | Futures Contracts The Fund may enter into futures contracts to manage exposure to interest rate, equity and market price movements and/or currency risks. A futures contract is an agreement between Counterparties to purchase or sell a specified underlying security, currency or commodity (or delivery of a cash settlement price, in the case of an index future) for a fixed price at a future date. The Fund currently invests only in exchange-traded futures and they are standardized as to maturity date and underlying financial instrument. Initial margin deposits required upon entering into futures contracts are satisfied by the segregation of specific securities or cash as collateral at the futures commission merchant (broker). During the period the futures contracts are open, changes in the value of the contracts are recognized as unrealized gains or losses by recalculating the value of the contracts on a daily basis. Subsequent or variation margin payments are received or made depending upon whether unrealized gains or losses are incurred. These amounts are reflected as receivables or payables on the Statement of Assets and Liabilities. When the contracts are closed or expire, the Fund recognizes a realized gain or loss equal to the difference between the proceeds from, or cost of, the closing transaction and the Funds basis in the contract. The net realized gain (loss) and the change in unrealized gain (loss) |
Invesco V.I. Core Plus Bond Fund
on futures contracts held during the period is included on the Statement of Operations. The primary risks associated with futures contracts are market risk and the absence of a liquid secondary market. If the Fund were unable to liquidate a futures contract and/or enter into an offsetting closing transaction, the Fund would continue to be subject to market risk with respect to the value of the contracts and continue to be required to maintain the margin deposits on the futures contracts. Futures contracts have minimal Counterparty risk since the exchanges clearinghouse, as Counterparty to all exchange-traded futures, guarantees the futures against default. Risks may exceed amounts recognized in the Statement of Assets and Liabilities. |
M. | Dollar Rolls and Forward Commitment Transactions The Fund may enter into dollar roll transactions to enhance the Funds performance. The Fund executes its dollar roll transactions in the to be announced (TBA) market whereby the Fund makes a forward commitment to purchase a security and, instead of accepting delivery, the position is offset by the sale of the security with a simultaneous agreement to repurchase at a future date. |
The Fund accounts for dollar roll transactions as purchases and sales and realizes gains and losses on these transactions. These transactions increase the Funds portfolio turnover rate. The Fund will segregate liquid assets in an amount equal to its dollar roll commitments. Dollar roll transactions may be considered borrowings under the 1940 Act.
Dollar roll transactions involve the risk that a Counterparty to the transaction may fail to complete the transaction. If this occurs, the Fund may lose the opportunity to purchase or sell the security at the agreed upon price. Dollar roll transactions also involve the risk that the value of the securities retained by the Fund may decline below the price of the securities that the Fund has sold but is obligated to purchase under the agreement.
N. | Swap Agreements The Fund may enter into various swap transactions, including interest rate, total return, index, currency and credit default swap contracts (CDS) for investment purposes or to manage interest rate, currency or credit risk. Such transactions are agreements between Counterparties. A swap agreement may be negotiated bilaterally and traded over-the-counter (OTC) between two parties (uncleared/OTC) or, in some instances, must be transacted through a future commission merchant (FCM) and cleared through a clearinghouse that serves as a central Counterparty (centrally cleared swap). These agreements may contain among other conditions, events of default and termination events, and various covenants and representations such as provisions that require the Fund to maintain a pre-determined level of net assets, and/or provide limits regarding the decline of the Funds NAV over specific periods of time. If the Fund were to trigger such provisions and have open derivative positions at that time, the Counterparty may be able to terminate such agreement and request immediate payment in an amount equal to the net liability positions, if any. |
Interest rate, total return, index, and currency swap agreements are two-party contracts entered into primarily to exchange the returns (or differentials in rates of returns) earned or realized on particular predetermined investments or instruments. The gross returns to be exchanged or swapped between the parties are calculated with respect to a notional amount, i.e., the return on or increase in value of a particular dollar amount invested at a particular interest rate or return of an underlying asset, in a particular foreign currency, or in a basket of securities representing a particular index.
In a centrally cleared swap, the Funds ultimate Counterparty is a central clearinghouse. The Fund initially will enter into centrally cleared swaps through an executing broker. When a fund enters into a centrally cleared swap, it must deliver to the central Counterparty (via the FCM) an amount referred to as initial margin. Initial margin requirements are determined by the central Counterparty, but an FCM may require additional initial margin above the amount required by the central Counterparty. Initial margin deposits required upon entering into centrally cleared swaps are satisfied by cash or securities as collateral at the FCM. Securities deposited as initial margin are designated on the Schedule of Investments and cash deposited is recorded on the Statement of Assets and Liabilities. During the term of a cleared swap agreement, a variation margin amount may be required to be paid by the Fund or may be received by the Fund, based on the daily change in price of the underlying reference instrument subject to the swap agreement and is recorded as a receivable or payable for variation margin in the Statement of Assets and Liabilities until the centrally cleared swap is terminated at which time a realized gain or loss is recorded.
A CDS is an agreement between Counterparties to exchange the credit risk of an issuer. A buyer of a CDS is said to buy protection by paying a fixed payment over the life of the agreement and in some situations an upfront payment to the seller of the CDS. If a defined credit event occurs (such as payment default or bankruptcy), the Fund as a protection buyer would cease paying its fixed payment, the Fund would deliver eligible bonds issued by the reference entity to the seller, and the seller would pay the full notional value, or the par value, of the referenced obligation to the Fund. A seller of a CDS is said to sell protection and thus would receive a fixed payment over the life of the agreement and an upfront payment, if applicable. If a credit event occurs, the Fund as a protection seller would cease to receive the fixed payment stream, the Fund would pay the buyer par value or the full notional value of the referenced obligation, and the Fund would receive the eligible bonds issued by the reference entity. In turn, these bonds may be sold in order to realize a recovery value. Alternatively, the seller of the CDS and its Counterparty may agree to net the notional amount and the market value of the bonds and make a cash payment equal to the difference to the buyer of protection. If no credit event occurs, the Fund receives the fixed payment over the life of the agreement. As the seller, the Fund would effectively add leverage to its portfolio because, in addition to its total net assets, the Fund would be subject to investment exposure on the notional amount of the CDS. In connection with these agreements, cash and securities may be identified as collateral in accordance with the terms of the respective swap agreements to provide assets of value and recourse in the event of default under the swap agreement or bankruptcy/insolvency of a party to the swap agreement. If a Counterparty becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties, the Fund may experience significant delays in obtaining any recovery in a bankruptcy or other reorganization proceeding. The Fund may obtain only limited recovery or may obtain no recovery in such circumstances. The Funds maximum risk of loss from Counterparty risk, either as the protection seller or as the protection buyer, is the value of the contract. The risk may be mitigated by having a master netting arrangement between the Fund and the Counterparty and by the designation of collateral by the Counterparty to cover the Funds exposure to the Counterparty.
Implied credit spreads represent the current level at which protection could be bought or sold given the terms of the existing CDS contract and serve as an indicator of the current status of the payment/performance risk of the CDS. An implied spread that has widened or increased since entry into the initial contract may indicate a deteriorating credit profile and increased risk of default for the reference entity. A declining or narrowing spread may indicate an improving credit profile or decreased risk of default for the reference entity. Alternatively, credit spreads may increase or decrease reflecting the general tolerance for risk in the credit markets.
Invesco V.I. Core Plus Bond Fund
An interest rate swap is an agreement between Counterparties pursuant to which the parties exchange a floating rate payment for a fixed rate payment based on a specified notional amount.
Changes in the value of centrally cleared and OTC swap agreements are recognized as unrealized gains (losses) in the Statement of Operations by marking to market on a daily basis to reflect the value of the swap agreement at the end of each trading day. Payments received or paid at the beginning of the agreement are reflected as such on the Statement of Assets and Liabilities and may be referred to as upfront payments. The Fund accrues for the fixed payment stream and amortizes upfront payments, if any, on swap agreements on a daily basis with the net amount, recorded as a component of realized gain (loss) on the Statement of Operations. A liquidation payment received or made at the termination of a swap agreement is recorded as realized gain (loss) on the Statement of Operations. The Fund segregates cash or liquid securities having a value at least equal to the amount of the potential obligation of a Fund under any swap transaction. Cash held as collateral is recorded as deposits with brokers on the Statement of Assets and Liabilities. Entering into these agreements involves, to varying degrees, lack of liquidity and elements of credit, market, and Counterparty risk in excess of amounts recognized on the Statement of Assets and Liabilities. Such risks involve the possibility that a swap is difficult to sell or liquidate; the Counterparty does not honor its obligations under the agreement and unfavorable interest rates and market fluctuations. It is possible that developments in the swaps market, including potential government regulation, could adversely affect the Funds ability to terminate existing swap agreements or to realize amounts to be received under such agreements. A short position in a security poses more risk than holding the same security long. As there is no limit on how much the price of the security can increase, the Funds exposure is unlimited.
Notional amounts of each individual credit default swap agreement outstanding as of December 31, 2017 for which the Fund is the seller of protection are disclosed in the open swap agreements table. These potential amounts would be partially offset by any recovery values of the respective referenced obligations, upfront payments received upon entering into the agreement, or net amounts received from the settlement of buy protection credit default swap agreements entered into by the Fund for the same referenced entity or entities.
O. | Leverage Risk Leverage exists when the Fund can lose more than it originally invests because it purchases or sells an instrument or enters into a transaction without investing an amount equal to the full economic exposure of the instrument or transaction. |
P. | Collateral To the extent the Fund has designated or segregated a security as collateral and that security is subsequently sold, it is the Funds practice to replace such collateral no later than the next business day. |
NOTE 2Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the Adviser or Invesco). Under the terms of the investment advisory agreement, the Fund accrues daily and pays monthly an advisory fee to the Adviser based on the annual rate of the Funds average daily net assets as follows:
Average Daily Net Assets | Rate | |||||||
First $500 million |
0 | .45% | ||||||
Next $500 million |
0 | .425% | ||||||
Next $1.5 billion |
0 | .40% | ||||||
Next $2.5 billion |
0 | .375% | ||||||
Over $5 billion |
0 | .35% |
For the year ended December 31, 2017, the effective advisory fees incurred by the Fund was 0.45%.
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. and separate sub-advisory agreements with Invesco PowerShares Capital Management LLC and Invesco Asset Management (India) Private Limited (collectively, the Affiliated Sub-Advisers) the Adviser, not the Fund, will pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least April 30, 2019, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Series I shares to 0.61% and Series II shares to 0.86% of average daily net assets (the expense limits). In determining the Advisers obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on April 30, 2019. During its term, the fee waiver agreement cannot be terminated or amended to increase the expense limits or reduce the advisory fee waiver without approval of the Board of Trustees.
Further, the Adviser has contractually agreed, through at least June 30, 2019, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the year ended December 31, 2017, the Adviser waived advisory fees of $79,181 and reimbursed Fund expenses of $93,145.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco a fee for costs incurred in providing accounting services and fund administrative services to the Fund and to reimburse Invesco for fees paid to insurance companies that have agreed to provide certain administrative services to the Fund. These administrative services provided by the insurance companies may include, among other things: maintenance of master accounts with the Fund; tracking, recording and transmitting net purchase and redemption orders for Fund shares; maintaining and preserving records related to the purchase, redemption and other account activity of variable product owners; distributing copies of Fund documents such as prospectuses, proxy materials and periodic reports, to variable product owners, and responding to inquiries from variable product owners about the Fund. Pursuant to such agreement, for the year ended December 31, 2017, Invesco was paid $50,000 for accounting and fund administrative services and was reimbursed $25,307 for fees paid to insurance companies.
Invesco V.I. Core Plus Bond Fund
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (IIS) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. For the year ended December 31, 2017, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
The Trust has entered into a master distribution agreement with Invesco Distributors, Inc. (IDI) to serve as the distributor for the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Funds Series II shares (the Plan). The Fund, pursuant to the Plan, pays IDI compensation at the annual rate of 0.25% of the Funds average daily net assets of Series II shares. The fees are accrued daily and paid monthly. Of the Plan payments, up to 0.25% of the average daily net assets of the Series II shares may be paid to insurance companies who furnish continuing personal shareholder services to customers who purchase and own Series II shares of the Fund. For the year ended December 31, 2017, expenses incurred under the Plan are detailed in the Statement of Operations as Distribution fees.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
NOTE 3Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investments assigned level:
Level 1 | Prices are determined using quoted prices in an active market for identical assets. |
Level 2 | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Level 3 | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Funds own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of December 31, 2017. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
The Funds policy is to recognize transfers in and out of the valuation levels as of the end of the reporting period. During the year ended December 31, 2017, there were no material transfers between valuation levels.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Investments in Securities | ||||||||||||||||
Bonds & Notes |
$ | | $ | 11,951,367 | $ | | $ | 11,951,367 | ||||||||
U.S. Government Sponsored Agency Mortgage-Backed Securities |
| 2,933,577 | | 2,933,577 | ||||||||||||
Asset-Backed Securities |
| 2,656,868 | | 2,656,868 | ||||||||||||
U.S. Treasury Securities |
| 1,538,903 | | 1,538,903 | ||||||||||||
Preferred Stocks |
197,240 | 7,105 | | 204,345 | ||||||||||||
Municipal Obligations |
| 64,271 | | 64,271 | ||||||||||||
Variable Rate Senior Loan Interests |
| 59,581 | | 59,581 | ||||||||||||
Common Stocks & Other Equity Interests |
| 268 | | 268 | ||||||||||||
Money Market Funds |
3,763,624 | | | 3,763,624 | ||||||||||||
Total Investments in Securities |
3,960,864 | 19,211,940 | | 23,172,804 | ||||||||||||
Other Investments Assets* | ||||||||||||||||
Futures Contracts |
1,206 | | | 1,206 | ||||||||||||
Other Investments Liabilities* | ||||||||||||||||
Forward Foreign Currency Contracts |
| (2,322 | ) | | (2,322 | ) | ||||||||||
Futures Contracts |
(5,016 | ) | | | (5,016 | ) | ||||||||||
(5,016 | ) | (2,322 | ) | | (7,338 | ) | ||||||||||
Total Other Investments |
(3,810 | ) | (2,322 | ) | | (6,132 | ) | |||||||||
Total Investments |
$ | 3,957,054 | $ | 19,209,618 | $ | | $ | 23,166,672 |
* | Unrealized appreciation (depreciation). |
NOTE 4Derivative Investments
The Fund may enter into an International Swaps and Derivatives Association Master Agreement (ISDA Master Agreement) under which a fund may trade OTC derivatives. An OTC transaction entered into under an ISDA Master Agreement typically involves a collateral posting arrangement, payment netting provisions and close-out netting provisions. These netting provisions allow for reduction of credit risk through netting of contractual obligations. The enforceability of the netting provisions of the ISDA Master Agreement depends on the governing law of the ISDA Master Agreement, among other factors.
For financial reporting purposes, the Fund does not offset OTC derivative assets or liabilities that are subject to ISDA Master Agreements in the Statement of Assets and Liabilities.
Invesco V.I. Core Plus Bond Fund
Value of Derivative Investments at Period-End
The table below summarizes the value of the Funds derivative investments, detailed by primary risk exposure, held as of December 31, 2017:
Value | ||||||||||||
Derivative Assets | Currency Risk | Interest Rate Risk | Total | |||||||||
Unrealized appreciation on futures contracts Exchange-Traded(a) |
$ | | $ | 1,206 | $ | 1,206 | ||||||
Derivatives not subject to master netting agreements |
| (1,206 | ) | (1,206 | ) | |||||||
Total Derivative Assets subject to master netting agreements |
$ | | $ | | $ | | ||||||
Value | ||||||||||||
Derivative Liabilities | Currency Risk | Interest Rate Risk | Total | |||||||||
Unrealized depreciation on futures contracts Exchange-Traded(a) |
$ | | $ | (5,016 | ) | $ | (5,016 | ) | ||||
Unrealized depreciation on forward foreign currency contracts outstanding |
(2,322 | ) | | (2,322 | ) | |||||||
Total Derivative Liabilities |
(2,322 | ) | (5,016 | ) | (7,338 | ) | ||||||
Derivatives not subject to master netting agreements |
| 5,016 | 5,016 | |||||||||
Total Derivative Liabilities subject to master netting agreements |
$ | (2,322 | ) | $ | | $ | (2,322 | ) |
(a) | The daily variation margin receivable (payable) at period-end is recorded in the Statement of Assets and Liabilities. |
Offsetting Assets and Liabilities
The table below reflects the Funds exposure to Counterparties subject to either an ISDA Master Agreement or other agreement for OTC derivative transactions as of December 31, 2017.
Financial Derivative Assets |
Financial Derivative Liabilities |
Net Value of Derivatives |
Collateral (Received)/Pledged |
Net Amount |
||||||||||||||||||||
Counterparty | Forward Foreign Currency Contracts |
Forward Foreign Currency Contracts |
Non-Cash | Cash | ||||||||||||||||||||
Barclays Bank PLC |
$ | | $ | (2,322 | ) | $ | (2,322 | ) | $ | | $ | | $ | (2,322 | ) |
Effect of Derivative Investments for the year ended December 31, 2017
The table below summarizes the gains (losses) on derivative investments, detailed by primary risk exposure, recognized in earnings during the period:
Location of Gain (Loss) on Statement of Operations |
||||||||||||||||
Credit Risk |
Currency Risk |
Interest Rate Risk |
Total | |||||||||||||
Realized Gain (Loss): |
||||||||||||||||
Forward foreign currency contracts |
$ | | $ | (3,444 | ) | $ | | $ | (3,444 | ) | ||||||
Futures contracts |
| | (98,763 | ) | (98,763 | ) | ||||||||||
Swap agreements |
(3,107 | ) | | | (3,107 | ) | ||||||||||
Change in Net Unrealized Appreciation (Depreciation): |
||||||||||||||||
Forward foreign currency contracts |
| (2,322 | ) | | (2,322 | ) | ||||||||||
Futures contracts |
| | (12,962 | ) | (12,962 | ) | ||||||||||
Swap agreements |
2,859 | | | 2,859 | ||||||||||||
Total |
$ | (248 | ) | $ | (5,766 | ) | $ | (111,725 | ) | $ | (117,739 | ) |
The table below summarizes the twelve month average notional value of futures contracts, the six month average notional value of forward foreign currency contracts and the five month average notional value of swap agreements outstanding during the period.
Forward Foreign Currency Contracts |
Futures Contracts |
Swap Agreements |
||||||||||
Average notional value |
$ | 197,491 | $ | 4,144,158 | $ | 250,000 |
NOTE 5Trustees and Officers Fees and Benefits
Trustees and Officers Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees and Officers Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees were eligible to participate in a retirement plan that provided for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees and Officers Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
Invesco V.I. Core Plus Bond Fund
NOTE 6Cash Balances
The Fund may borrow for leveraging in an amount up to 5% of the Funds total assets (excluding the amount borrowed) at the time the borrowing is made. In doing so, the Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate. The Fund may not purchase additional securities when any borrowings from banks exceed 5% of the Funds total assets.
NOTE 7Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended December 31, 2017 and 2016:
2017 | 2016 | |||||||
Ordinary income |
$ | 651,274 | $ | 651,057 |
Tax Components of Net Assets at Period-End:
2017 | ||||
Undistributed ordinary income |
$ | 613,154 | ||
Net unrealized appreciation investments |
399,564 | |||
Net unrealized appreciation foreign currencies |
1,054 | |||
Temporary book/tax differences |
(52,846 | ) | ||
Shares of beneficial interest |
19,488,001 | |||
Total net assets |
$ | 20,448,927 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Funds net unrealized appreciation difference is attributable primarily to forward foreign currency contracts and straddle loss deferral.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Funds temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund does not have a capital loss carryforward as of December 31, 2017.
NOTE 8Investment Transactions
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended December 31, 2017 was $58,435,584 and $57,689,832, respectively. During the same period, purchases and sales of U.S. Treasury obligations were $15,762,975 and $15,792,060, respectively. Cost of investments, including any derivatives, on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investments on a Tax Basis | ||||
Aggregate unrealized appreciation of investments |
$ | 500,953 | ||
Aggregate unrealized (depreciation) of investments |
(101,389 | ) | ||
Net unrealized appreciation of investments |
$ | 399,564 |
Cost of investments for tax purposes is $22,767,108.
NOTE 9Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of expired capital loss carryforward, on December 31, 2017, undistributed net investment income was increased by $49,450, undistributed net realized gain was increased by $7,177,411 and shares of beneficial interest was decreased by $7,226,861. This reclassification had no effect on the net assets of the Fund.
Invesco V.I. Core Plus Bond Fund
NOTE 10Share Information
Summary of Share Activity | ||||||||||||||||
Years ended December 31, | ||||||||||||||||
2017(a) | 2016 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: |
||||||||||||||||
Series I |
1,139,378 | $ | 7,342,799 | 234,703 | $ | 1,481,864 | ||||||||||
Series II |
2 | 14 | 2 | 14 | ||||||||||||
Issued as reinvestment of dividends: |
||||||||||||||||
Series I |
101,948 | 647,374 | 102,079 | 646,158 | ||||||||||||
Series II |
568 | 3,588 | 716 | 4,517 | ||||||||||||
Reacquired: |
||||||||||||||||
Series I |
(545,804 | ) | (3,501,473 | ) | (412,191 | ) | (2,591,994 | ) | ||||||||
Series II |
(1,551 | ) | (9,826 | ) | (6,221 | ) | (40,046 | ) | ||||||||
Net increase (decrease) in share activity |
694,541 | $ | 4,482,476 | (80,912 | ) | $ | (499,487 | ) |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 84% of the outstanding shares of the Fund. The Fund and the Funds principal underwriter or adviser, are parties to participation agreements with these entities whereby these entities sell units of interest in separate accounts funding variable products that are invested in the Fund. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
Invesco V.I. Core Plus Bond Fund
NOTE 11Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Net asset value, beginning of period |
Net investment income(a) |
Net gains (losses) on securities (both realized and unrealized) |
Total from investment operations |
Dividends from net investment income |
Net asset value, end of period |
Total return(b) |
Net assets, end of period (000s omitted) |
Ratio
of expenses to average net assets with fee waivers and/or expenses absorbed |
Ratio of expenses to average net assets without fee waivers and/or expenses absorbed |
Ratio of net investment income to average net assets |
Portfolio turnover(c) |
|||||||||||||||||||||||||||||||||||||
Series I |
||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/17 |
$ | 6.21 | $ | 0.22 | $ | 0.17 | $ | 0.39 | $ | (0.22 | ) | $ | 6.38 | 6.34 | % | $ | 20,326 | 0.60 | %(d) | 1.58 | %(d) | 3.46 | %(d) | 407 | % | |||||||||||||||||||||||
Year ended 12/31/16 |
6.07 | 0.23 | 0.18 | 0.41 | (0.27 | ) | 6.21 | 6.66 | 15,485 | 0.55 | 1.68 | 3.71 | 474 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/15 |
6.39 | 0.24 | (0.26 | ) | (0.02 | ) | (0.30 | ) | 6.07 | (0.37 | ) | 15,587 | 0.65 | 1.73 | 3.81 | 416 | ||||||||||||||||||||||||||||||||
Year ended 12/31/14 |
6.23 | 0.26 | 0.24 | 0.50 | (0.34 | ) | 6.39 | 8.03 | 17,821 | 0.75 | 1.77 | 4.04 | 255 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/13 |
6.54 | 0.27 | (0.27 | ) | 0.00 | (0.31 | ) | 6.23 | 0.05 | 19,671 | 0.75 | 1.76 | 4.18 | 150 | ||||||||||||||||||||||||||||||||||
Series II |
||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/17 |
6.19 | 0.20 | 0.16 | 0.36 | (0.20 | ) | 6.35 | 5.89 | 123 | 0.85 | (d) | 1.83 | (d) | 3.21 | (d) | 407 | ||||||||||||||||||||||||||||||||
Year ended 12/31/16 |
6.04 | 0.22 | 0.18 | 0.40 | (0.25 | ) | 6.19 | 6.52 | 126 | 0.80 | 1.93 | 3.46 | 474 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/15 |
6.36 | 0.22 | (0.26 | ) | (0.04 | ) | (0.28 | ) | 6.04 | (0.64 | ) | 156 | 0.90 | 1.98 | 3.56 | 416 | ||||||||||||||||||||||||||||||||
Year ended 12/31/14 |
6.19 | 0.24 | 0.24 | 0.48 | (0.31 | ) | 6.36 | 7.85 | 161 | 1.00 | 2.02 | 3.79 | 255 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/13 |
6.50 | 0.25 | (0.27 | ) | (0.02 | ) | (0.29 | ) | 6.19 | (0.26 | ) | 172 | 1.00 | 2.01 | 3.93 | 150 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year, if applicable, and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns. |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. |
(d) | Ratios are based on average daily net assets (000s omitted) of $17,471 and $125 for Series I and Series II shares, respectively. |
Invesco V.I. Core Plus Bond Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
and Shareholders of Invesco V.I. Core Plus Bond Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Invesco V.I. Core Plus Bond Fund (one of the funds constituting AIM Variable Insurance Funds (Invesco Variable Insurance Funds), hereafter referred to as the Fund) as of December 31, 2017, the related statement of operations for the year ended December 31, 2017, the statement of changes in net assets for each of the two years in the period ended December 31, 2017, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2017 (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2017 and the financial highlights for each of the five years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Funds management. Our responsibility is to express an opinion on the Funds financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2017 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, TX
February 14, 2018
We have served as the auditor of one or more investment companies in the Invesco/PowerShares group of investment companies since at least 1995. We have not determined the specific year we began serving as auditor.
Invesco V.I. Core Plus Bond Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period July 1, 2017 through December 31, 2017.
The actual and hypothetical expenses in the examples below do not represent the effect of any fees or other expenses assessed in connection with a variable product; if they did, the expenses shown would be higher while the ending account values shown would be lower.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled Actual Expenses Paid During Period to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Funds actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs. Therefore, the hypothetical information is useful in comparing ongoing costs, and will not help you determine the relative total costs of owning different funds.
Class | Beginning Account Value (07/01/17) |
ACTUAL | HYPOTHETICAL (5% annual return before expenses) |
Annualized Expense Ratio |
||||||||||||||||||||
Ending Account Value (12/31/17)1 |
Expenses Paid During Period2 |
Ending Account Value (12/31/17) |
Expenses Paid During Period2 |
|||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 1,017.50 | $ | 3.00 | $ | 1,022.23 | $ | 3.01 | 0.59 | % | ||||||||||||
Series II | 1,000.00 | 1,014.60 | 4.27 | 1,020.97 | 4.28 | 0.84 |
1 | The actual ending account value is based on the actual total return of the Fund for the period July 1, 2017 through December 31, 2017, after actual expenses and will differ from the hypothetical ending account value which is based on the Funds expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Funds annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half year. |
Invesco V.I. Core Plus Bond Fund
Tax Information
Form 1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific states requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended December 31, 2017:
Federal and State Income Tax |
||||
Corporate Dividends Received Deduction* |
1.38 | % | ||
U.S. Treasury Obligations* |
3.28 | % |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Funds fiscal year. |
Invesco V.I. Core Plus Bond Fund
Trustees and Officers
The address of each trustee and officer is AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Trust), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trusts organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 1960 Trustee |
2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business
Formerly: Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US), Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) |
158 | None | ||||
Philip A. Taylor2 1954 Trustee and Senior Vice President |
2006 | Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco Aim Management Group, Inc.) (financial services holding company); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.) (registered transfer agent); Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company); Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management).
Formerly: Co-Chairman, Co-President and Co-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chief Executive Officer and President, Van Kampen Exchange Corp; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurers Series Trust (Invesco Treasurers Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurers Series Trust (Invesco Treasurers Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) (registered broker dealer); Manager, Invesco PowerShares Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco Aim Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurers Series Trust (Invesco Treasurers Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. |
158 | None |
1 | Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser. |
2 | Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser. |
Invesco V.I. Core Plus Bond Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Independent Trustees | ||||||||
Bruce L. Crockett 1944 Trustee and Chair |
1993 | Chairman, Crockett Technologies Associates (technology consulting company)
Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute: Member of the Audit Committee, Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council |
158 | Director and Chairman of the Audit Committee, ALPS (Attorneys Liability Protection Society) (insurance company); Director and Member of the Audit Committee and Compensation Committee, Ferroglobe PLC (metallurgical company) | ||||
David C. Arch 1945 Trustee |
2010 | Chairman of Blistex Inc. (consumer health care products manufacturer); Member, World Presidents Organization | 158 | Board member of the Illinois Manufacturers Association | ||||
Jack M. Fields 1952 Trustee |
1997 | Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Chairman, Discovery Learning Alliance (non-profit)
Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff) (human resources provider); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives |
158 | None | ||||
Cynthia Hostetler 1962 Trustee |
2017 | Non-Executive Director and Trustee of a number of public and private business corporations
Formerly: Head of Investment Funds and Private Equity, Overseas Private Investment Corporation; President, First Manhattan Bancorporation, Inc.; Attorney, Simpson Thacher & Bartlett LLP |
158 | Vulcan Materials Company (construction materials company); Trilinc Global Impact Fund; Aberdeen Investment Funds (4 portfolios); Artio Global Investment LLC (mutual fund complex); Edgen Group, Inc. (specialized energy and infrastructure products distributor) | ||||
Eli Jones 1961 Trustee |
2016 | Professor and Dean, Mays Business School Texas A&M University
Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University; Director, Arvest Bank |
158 | Insperity, Inc. (formerly known as Administaff) (human resources provider) | ||||
Prema Mathai-Davis 1950 Trustee |
1998 | Retired. | 158 | None | ||||
Teresa M. Ressel 1962 Trustee |
2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Chief Financial Officer, Olayan America, The Olayan Group (international investor/commercial/industrial); Chief Executive Officer, UBS Securities LLC; Group Chief Operating Officer, Americas, UBS AG; Assistant Secretary for Management & Budget and CFO, US Department of the Treasury |
158 | Atlantic Power Corporation (power generation company); ON Semiconductor Corp. (semiconductor supplier) | ||||
Ann Barnett Stern 1957 Trustee |
2017 | President and Chief Executive Officer, Houston Endowment Inc. (private philanthropic institution)
Formerly: Executive Vice President and General Counsel, Texas Childrens Hospital; Attorney, Beck, Redden and Secrest, LLP; Business Law Instructor, University of St. Thomas; Attorney, Andrews & Kurth LLP |
158 | Federal Reserve Bank of Dallas | ||||
Raymond Stickel, Jr. 1944 Trustee |
2005 | Retired.
Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios); Partner, Deloitte & Touche |
158 | None | ||||
Robert C. Troccoli 1949 Trustee |
2016 | Adjunct Professor, University of Denver Daniels College of Business
Formerly: Senior Partner, KPMG LLP |
158 | None | ||||
Christopher L. Wilson 1957 Trustee |
2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Managing Partner, CT2, LLC (investing and consulting firm); President/Chief Executive Officer, Columbia Funds, Bank of America Corporation; President/Chief Executive Officer, CDC IXIS Asset Management Services, Inc.; Principal & Director of Operations, Scudder Funds, Scudder, Stevens & Clark, Inc.; Assistant Vice President, Fidelity Investments |
158 | TD Asset Management USA Inc. (mutual fund complex) (22 portfolios); ISO New England, Inc. (non-profit organization managing regional electricity market) |
Invesco V.I. Core Plus Bond Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers | ||||||||
Sheri Morris 1964 President, Principal Executive Officer and Treasurer |
1999 | President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco Aim Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; and Treasurer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust and PowerShares Actively Managed Exchange-Traded Fund Trust |
N/A | N/A | ||||
Russell C. Burk 1958 Senior Vice President and Senior Officer |
2005 | Senior Vice President and Senior Officer, The Invesco Funds | N/A | N/A | ||||
John M. Zerr 1962 Senior Vice President, Chief Legal Officer and Secretary |
2006 | Director, Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Managing Director, Invesco PowerShares Capital Management LLC; Director, Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust; Manager and Secretary, Invesco Indexing LLC
Formerly: Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser); Vice President and Secretary, PBHG Funds (an investment company) and PBHG Insurance Series Fund (an investment company); Chief Operating Officer, General Counsel and Secretary, Old Mutual Investment Partners (a broker-dealer); General Counsel and Secretary, Old Mutual Fund Services (an administrator) and Old Mutual Shareholder Services (a shareholder servicing center); Executive Vice President, General Counsel and Secretary, Old Mutual Capital, Inc. (an investment adviser); and Vice President and Secretary, Old Mutual Advisors Funds (an investment company) |
N/A | N/A | ||||
Gregory G. McGreevey 1962 Senior Vice President |
2012 | Senior Managing Director, Invesco Ltd.; Director, Chairman, President, and Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President, Invesco Management Group, Inc.; Director, Invesco Mortgage Capital, Inc. and Invesco Senior Secured Management, Inc.; and Senior Vice President, The Invesco Funds
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A | ||||
Kelli Gallegos 1970 Vice President, Principal Financial Officer and Assistant Treasurer |
2008 | Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A |
Invesco V.I. Core Plus Bond Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers(continued) | ||||||||
Tracy Sullivan 1962 Vice President, Chief Tax Officer and Assistant Treasurer |
2008 | Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A | ||||
Crissie M. Wisdom 1969 Anti-Money Laundering Compliance Officer |
2013 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., Invesco Management Group, Inc., The Invesco Funds, and PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp. |
N/A | N/A | ||||
Robert R. Leveille 1969 Chief Compliance Officer |
2016 | Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds
Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds |
N/A | N/A |
The Statement of Additional Information of the Trust includes additional information about the Funds Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Funds Statement of Additional Information for information on the Funds sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 |
Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Auditors PricewaterhouseCoopers LLP 1000 Louisiana Street, Suite 5800 Houston, TX 77002-5678 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2005 Market Street, Suite 2600 Philadelphia, PA 19103-7018 |
Counsel to the Independent Trustees Goodwin Procter LLP 901 New York Avenue, N.W. Washington, D.C. 20001 |
Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
Invesco V.I. Core Plus Bond Fund
| ||||
Annual Report to Shareholders
|
December 31, 2017 | |||
| ||||
Invesco V.I. Diversified Dividend Fund
|
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Funds semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The Funds Form N-Q filings are available on the SEC website, sec.gov. Copies of the Funds Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-07452 and 033-57340. The Funds most recent portfolio holdings, as filed on Form N-Q, have also been made available to insurance companies issuing variable annuity contracts and variable life insurance policies (variable products) that invest in the Fund. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/ proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
This report must be accompanied or preceded by a currently effective Fund prospectus and variable product prospectus, which contain more complete information, including sales charges and expenses. Investors should read each carefully before investing.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE | ||
Invesco Distributors, Inc. VIDDI-AR-1 02092018 0937 |
Managements Discussion of Fund Performance
Invesco V.I. Diversified Dividend Fund
Invesco V.I. Diversified Dividend Fund
Your Funds Long-Term Performance
Results of a $10,000 Investment Oldest Share Class(es)
Fund and index data from 12/31/07
1 | Source: FactSet Research Systems Inc. |
2 | Source: Lipper Inc. |
Past performance cannot guarantee
comparable future results.
Invesco V.I. Diversified Dividend Fund
Invesco V.I. Diversified Dividend Funds investment objective is to provide reasonable current income and long-term growth of income and capital.
∎ | Unless otherwise stated, information presented in this report is as of December 31, 2017, and is based on total net assets. |
∎ | Unless otherwise noted, all data provided by Invesco. |
Invesco V.I. Diversified Dividend Fund
Schedule of Investments(a)
December 31, 2017
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Diversified Dividend Fund
Investment Abbreviations:
REIT | Real Estate Investment Trust |
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poors. |
(b) | The money market fund and the Fund are affiliated by having the same investment adviser. The rate shown is the 7-day SEC standardized yield as of December 31, 2017. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Diversified Dividend Fund
Open Forward Foreign Currency Contracts | ||||||||||||||||||||||
Settlement Date |
Contract to | Unrealized Appreciation (Depreciation) |
||||||||||||||||||||
Counterparty | Deliver | Receive | ||||||||||||||||||||
01/23/2018 |
Citigroup Global Markets Inc. | USD | 44,921 | CAD | 57,153 | $ | 568 | |||||||||||||||
01/23/2018 |
Citigroup Global Markets Inc. | USD | 41,308 | EUR | 34,887 | 616 | ||||||||||||||||
01/23/2018 |
JPMorgan Chase Bank, N.A. | USD | 7,742,537 | CAD | 9,930,081 | 161,007 | ||||||||||||||||
01/23/2018 |
Merrill Lynch International | USD | 29,301 | CAD | 37,354 | 430 | ||||||||||||||||
01/23/2018 |
State Street Bank and Trust Co. | USD | 152,130 | CAD | 194,877 | 2,977 | ||||||||||||||||
Subtotal Appreciation |
165,598 | |||||||||||||||||||||
01/23/2018 |
Citigroup Global Markets Inc. | CAD | 3,356,047 | USD | 2,632,122 | (39,022 | ) | |||||||||||||||
01/23/2018 |
Citigroup Global Markets Inc. | EUR | 6,121,709 | USD | 7,225,720 | (130,748 | ) | |||||||||||||||
01/23/2018 |
JPMorgan Chase Bank, N.A. | CAD | 5,100,260 | USD | 3,996,015 | (63,381 | ) | |||||||||||||||
01/23/2018 |
JPMorgan Chase Bank, N.A. | EUR | 6,351,938 | USD | 7,498,533 | (134,601 | ) | |||||||||||||||
01/23/2018 |
Merrill Lynch International | EUR | 6,100,603 | USD | 7,201,410 | (129,696 | ) | |||||||||||||||
01/23/2018 |
State Street Bank and Trust Co. | CAD | 3,356,047 | USD | 2,632,865 | (38,279 | ) | |||||||||||||||
01/23/2018 |
State Street Bank and Trust Co. | EUR | 6,269,005 | USD | 7,401,604 | (131,869 | ) | |||||||||||||||
Subtotal Depreciation |
(667,596 | ) | ||||||||||||||||||||
Total Forward Foreign Currency Contracts Currency Risk |
$ | (501,998 | ) |
Currency Abbreviations:
CAD | Canadian Dollar | |
EUR | Euro | |
USD | U.S. Dollar |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Diversified Dividend Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Diversified Dividend Fund
Statement of Changes in Net Assets
For the years ended December 31, 2017 and 2016
2017 | 2016 | |||||||
Operations: |
||||||||
Net investment income |
$ | 13,317,506 | $ | 10,874,801 | ||||
Net realized gain |
23,965,217 | 25,956,331 | ||||||
Change in net unrealized appreciation |
17,403,668 | 40,354,776 | ||||||
Net increase in net assets resulting from operations |
54,686,391 | 77,185,908 | ||||||
Distributions to shareholders from net investment income: |
||||||||
Series I |
(7,270,269 | ) | (5,214,115 | ) | ||||
Series ll |
(3,521,736 | ) | (2,189,930 | ) | ||||
Total distributions from net investment income |
(10,792,005 | ) | (7,404,045 | ) | ||||
Distributions to shareholders from net realized gains: |
||||||||
Series l |
(14,902,165 | ) | | |||||
Series ll |
(8,103,670 | ) | | |||||
Total distributions from net realized gains |
(23,005,835 | ) | | |||||
Share transactionsnet: |
||||||||
Series l |
(16,772,830 | ) | 57,813,882 | |||||
Series ll |
20,130,628 | 61,825,573 | ||||||
Net increase in net assets resulting from share transactions |
3,357,798 | 119,639,455 | ||||||
Net increase in net assets |
24,246,349 | 189,421,318 | ||||||
Net assets: |
||||||||
Beginning of year |
655,470,850 | 466,049,532 | ||||||
End of year (includes undistributed net investment income of $13,200,591 and $10,458,704, respectively) |
$ | 679,717,199 | $ | 655,470,850 |
Notes to Financial Statements
December 31, 2017
NOTE 1Significant Accounting Policies
Invesco V.I. Diversified Dividend Fund (the Fund) is a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Trust). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end series management investment company consisting of twenty-four separate portfolios, (each constituting a Fund). The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each Fund or class will be voted on exclusively by the shareholders of such Fund or class. Current Securities and Exchange Commission (SEC) guidance, however, requires participating insurance companies offering separate accounts to vote shares proportionally in accordance with the instructions of the contract owners whose investments are funded by shares of each Fund or class.
The Funds investment objective is to provide reasonable current income and long-term growth of income and capital.
The Fund currently offers two classes of shares, Series I and Series II, both of which are offered to insurance company separate accounts funding variable annuity contracts and variable life insurance policies (variable products).
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946, Financial Services Investment Companies.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations Securities, including restricted securities, are valued according to the following policy. |
A security listed or traded on an exchange (except convertible securities) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and asked prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and asked prices. For purposes of determining net asset value (NAV) per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (NYSE).
Invesco V.I. Diversified Dividend Fund
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end-of-day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
Debt obligations (including convertible securities) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual trading characteristics and other market data. Pricing services generally value debt obligations assuming orderly transactions of institutional round lot size, but a fund may hold or transact in the same securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Foreign securities (including foreign exchange contracts) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that the investment adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trusts officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/asked quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a securitys fair value.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuers assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
B. | Securities Transactions and Investment Income Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any) is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Funds net asset value and, accordingly, they reduce the Funds total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and the Statement of Changes in Net Assets, or the net investment income per share and the ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. | Country Determination For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuers securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
D. | Distributions Distributions from net investment income and net realized capital gain, if any, are generally declared and paid to separate accounts of participating insurance companies annually and recorded on the ex-dividend date. |
Invesco V.I. Diversified Dividend Fund
E. | Federal Income Taxes The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the Internal Revenue Code), necessary to qualify as a regulated investment company and to distribute substantially all of the Funds taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. |
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Funds uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
F. | Expenses Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
G. | Accounting Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
H. | Indemnifications Under the Trusts organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Funds servicing agreements, that contain a variety of indemnification clauses. The Funds maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
I. | Foreign Currency Translations Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Funds books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. |
The Fund may invest in foreign securities, which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests and are shown in the Statement of Operations.
J. | Forward Foreign Currency Contracts The Fund may engage in foreign currency transactions either on a spot (i.e. for prompt delivery and settlement) basis, or through forward foreign currency contracts, to manage or minimize currency or exchange rate risk. |
The Fund may also enter into forward foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to lock in the U.S. dollar price of that security, or the Fund may also enter into forward foreign currency contracts that do not provide for physical settlement of the two currencies, but instead are settled by a single cash payment calculated as the difference between the agreed upon exchange rate and the spot rate at settlement based upon an agreed upon notional amount (non-deliverable forwards). The Fund will set aside liquid assets in an amount equal to the daily mark-to-market obligation for forward foreign currency contracts.
A forward foreign currency contract is an obligation between two parties (Counterparties) to purchase or sell a specific currency for an agreed-upon price at a future date. The use of forward foreign currency contracts does not eliminate fluctuations in the price of the underlying securities the Fund owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statement of Operations. The primary risks associated with forward foreign currency contracts include failure of the Counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities.
NOTE 2Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the Adviser or Invesco). Under the terms of the investment advisory agreement, the Fund accrues daily and pays monthly an advisory fee to the Adviser based on the annual rate of the Funds average daily net assets as follows:
Average Daily Net Assets | Rate | |||||||
First $250 million |
0 | .545% | ||||||
Next $750 million |
0 | .42% | ||||||
Next $1 billion |
0 | .395% | ||||||
Over $2 billion |
0 | .37% |
Invesco V.I. Diversified Dividend Fund
For the year ended December 31, 2017, the effective advisory fees incurred by the Fund was 0.47%.
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. and separate sub-advisory agreements with Invesco PowerShares Capital Management LLC and Invesco Asset Management (India) Private Limited (collectively, the Affiliated Sub-Advisers) the Adviser, not the Fund, will pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2018, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Series I shares to 2.00% and Series II shares to 2.25% of average daily net assets (the expense limits). In determining the Advisers obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on June 30, 2018. During its term, the fee waiver agreement cannot be terminated or amended to increase the expense limits or reduce the advisory fee waiver without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
Further, the Adviser has contractually agreed, through at least June 30, 2019, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the year ended December 31, 2017, the Adviser waived advisory fees of $97,940.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco a fee for costs incurred in providing accounting services and fund administrative services to the Fund and to reimburse Invesco for fees paid to insurance companies that have agreed to provide certain administrative services to the Fund. These administrative services provided by the insurance companies may include, among other things: maintenance of master accounts with the Fund; tracking, recording and transmitting net purchase and redemption orders for Fund shares; maintaining and preserving records related to the purchase, redemption and other account activity of variable product owners; distributing copies of Fund documents such as prospectuses, proxy materials and periodic reports, to variable product owners, and responding to inquiries from variable product owners about the Fund. Pursuant to such agreement, for the year ended December 31, 2017, Invesco was paid $159,534 for accounting and fund administrative services and was reimbursed $844,480 for fees paid to insurance companies.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (IIS) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. For the year ended December 31, 2017, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
The Trust has entered into a master distribution agreement with Invesco Distributors, Inc. (IDI) to serve as the distributor for the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Funds Series II shares (the Plan). The Fund, pursuant to the Plan, pays IDI compensation at the annual rate of 0.25% of the Funds average daily net assets of Series II shares. The fees are accrued daily and paid monthly. Of the Plan payments, up to 0.25% of the average daily net assets of the Series II shares may be paid to insurance companies who furnish continuing personal shareholder services to customers who purchase and own Series II shares of the Fund. For the year ended December 31, 2017, expenses incurred under the Plan are detailed in the Statement of Operations as Distribution fees.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
NOTE 3Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investments assigned level:
Level 1 | Prices are determined using quoted prices in an active market for identical assets. |
Level 2 | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Level 3 | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Funds own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of December 31, 2017. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
Invesco V.I. Diversified Dividend Fund
The Funds policy is to recognize transfers in and out of the valuation levels as of the end of the reporting period. During the year ended December 31, 2017, there were no material transfers between valuation levels.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Investments in Securities | ||||||||||||||||
Common Stocks & Other Equity Interests |
$ | 543,167,158 | $ | 70,229,590 | $ | | $ | 613,396,748 | ||||||||
Money Market Funds |
67,056,094 | | | 67,056,094 | ||||||||||||
Total Investments in Securities |
610,223,252 | 70,229,590 | | 680,452,842 | ||||||||||||
Other Investments Assets* | ||||||||||||||||
Forward Foreign Currency Contracts |
| 165,598 | | 165,598 | ||||||||||||
Other Investments Liabilities* | ||||||||||||||||
Forward Foreign Currency Contracts |
| (667,596 | ) | | (667,596 | ) | ||||||||||
Total Other Investments |
| (501,998 | ) | | (501,998 | ) | ||||||||||
Total Investments |
$ | 610,223,252 | $ | 69,727,592 | $ | | $ | 679,950,844 |
* | Unrealized appreciation (depreciation). |
NOTE 4Derivative Investments
The Fund may enter into an International Swaps and Derivatives Association Master Agreement (ISDA Master Agreement) under which a fund may trade OTC derivatives. An OTC transaction entered into under an ISDA Master Agreement typically involves a collateral posting arrangement, payment netting provisions and close-out netting provisions. These netting provisions allow for reduction of credit risk through netting of contractual obligations. The enforceability of the netting provisions of the ISDA Master Agreement depends on the governing law of the ISDA Master Agreement, among other factors.
For financial reporting purposes, the Fund does not offset OTC derivative assets or liabilities that are subject to ISDA Master Agreements in the Statement of Assets and Liabilities.
Value of Derivative Investments at Period-End
The table below summarizes the value of the Funds derivative investments, detailed by primary risk exposure, held as of December 31, 2017:
Value | ||||
Derivative Assets | Currency Risk |
|||
Unrealized appreciation on forward foreign currency contracts outstanding |
$ | 165,598 | ||
Derivatives not subject to master netting agreements |
| |||
Total Derivative Assets subject to master netting agreements |
$ | 165,598 | ||
Value | ||||
Derivative Liabilities | Currency Risk |
|||
Unrealized depreciation on forward foreign currency contracts outstanding |
$ | (667,596 | ) | |
Derivatives not subject to master netting agreements |
| |||
Total Derivative Liabilities subject to master netting agreements |
$ | (667,596 | ) |
Offsetting Assets and Liabilities
The table below reflects the Funds exposure to Counterparties subject to either an ISDA Master Agreement or other agreement for OTC derivative transactions as of December 31, 2017.
Financial Derivative Assets |
Financial Derivative Liabilities |
Collateral (Received)/Pledged | ||||||||||||||||||||||
Counterparty | Forward Foreign Currency Contracts |
Forward Foreign Currency Contracts |
Net Value of Derivatives |
Non-Cash | Cash | Net Amount |
||||||||||||||||||
Citigroup Global Markets Inc. |
$ | 1,184 | $ | (169,770 | ) | $ | (168,586 | ) | $ | | $ | | $ | (168,586 | ) | |||||||||
JPMorgan Chase Bank, N.A. |
161,007 | (197,982 | ) | (36,975 | ) | | | (36,975 | ) | |||||||||||||||
Merrill Lynch International |
430 | (129,696 | ) | (129,266 | ) | | | (129,266 | ) | |||||||||||||||
State Street Bank and Trust Co. |
2,977 | (170,148 | ) | (167,171 | ) | | | (167,171 | ) | |||||||||||||||
Total |
$ | 165,598 | $ | (667,596 | ) | $ | (501,998 | ) | $ | | $ | | $ | (501,998 | ) |
Invesco V.I. Diversified Dividend Fund
Effect of Derivative Investments for the year ended December 31, 2017
The table below summarizes the gains (losses) on derivative investments, detailed by primary risk exposure, recognized in earnings during the period:
Location of Gain (Loss) on Statement of Operations |
||||
Currency Risk |
||||
Realized Gain (Loss): |
||||
Forward foreign currency contracts |
$ | (1,875,503 | ) | |
Change in Net Unrealized Appreciation (Depreciation): |
||||
Forward foreign currency contracts |
(784,599 | ) | ||
Total |
$ | (2,660,102 | ) |
The table below summarizes the average notional value of forward foreign currency contracts outstanding during the period.
Forward Foreign Currency Contracts |
||||
Average notional value |
$ | 31,272,899 |
NOTE 5Trustees and Officers Fees and Benefits
Trustees and Officers Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees and Officers Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees were eligible to participate in a retirement plan that provided for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees and Officers Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 6Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period-end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 7Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended December 31, 2017 and 2016:
2017 | 2016 | |||||||
Ordinary income |
$ | 10,792,005 | $ | 7,404,045 | ||||
Long-term capital gain |
23,005,835 | | ||||||
Total distributions |
$ | 33,797,840 | $ | 7,404,045 |
Tax Components of Net Assets at Period-End:
2017 | ||||
Undistributed ordinary income |
$ | 13,314,207 | ||
Undistributed long-term gain |
19,907,580 | |||
Net unrealized appreciation investments |
152,022,238 | |||
Net unrealized appreciation foreign currencies |
2,402 | |||
Temporary book/tax differences |
(113,617 | ) | ||
Shares of beneficial interest |
494,584,389 | |||
Total net assets |
$ | 679,717,199 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Funds net unrealized appreciation difference is attributable primarily to wash sales and forward foreign currency contracts.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Funds temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. Capital losses generated in years beginning after December 22, 2010
Invesco V.I. Diversified Dividend Fund
can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund does not have a capital loss carryforward as of December 31, 2017.
NOTE 8Investment Transactions
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended December 31, 2017 was $106,200,499 and $94,196,885, respectively. Cost of investments, including any derivatives, on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investments on a Tax Basis | ||||
Aggregate unrealized appreciation of investments |
$ | 158,682,997 | ||
Aggregate unrealized (depreciation) of investments |
(6,660,759 | ) | ||
Net unrealized appreciation of investments |
$ | 152,022,238 |
Cost of investments for tax purposes is $527,928,606.
NOTE 9Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of real estate investment trust distributions, on December 31, 2017, undistributed net investment income was increased by $216,386 and undistributed net realized gain was decreased by $216,386. This reclassification had no effect on the net assets of the Fund.
NOTE 10Share Information
Summary of Share Activity | ||||||||||||||||
Years ended December 31, | ||||||||||||||||
2017(a) | 2016 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: |
||||||||||||||||
Series I |
1,525,555 | $ | 41,126,302 | 4,800,783 | $ | 118,506,697 | ||||||||||
Series II |
1,317,421 | 35,352,684 | 3,129,929 | 77,280,863 | ||||||||||||
Issued as reinvestment of dividends: |
||||||||||||||||
Series I |
845,631 | 22,172,434 | 206,092 | 5,214,115 | ||||||||||||
Series II |
446,102 | 11,625,406 | 86,971 | 2,189,930 | ||||||||||||
Reacquired: |
||||||||||||||||
Series I |
(2,963,737 | ) | (80,071,566 | ) | (2,670,659 | ) | (65,906,930 | ) | ||||||||
Series II |
(998,279 | ) | (26,847,462 | ) | (717,830 | ) | (17,645,220 | ) | ||||||||
Net increase in share activity |
172,693 | $ | 3,357,798 | 4,835,286 | $ | 119,639,455 |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 65% of the outstanding shares of the Fund. The Fund and the Funds principal underwriter or adviser, are parties to participation agreements with these entities whereby these entities sell units of interest in separate accounts funding variable products that are invested in the Fund. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
Invesco V.I. Diversified Dividend Fund
NOTE 11Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Net asset value, beginning of period |
Net investment income(a) |
Net gains on securities (both realized and unrealized) |
Total from investment operations |
Dividends from net investment income |
Distributions from net realized gains |
Total distributions |
Net asset value, end of period |
Total return(b) |
Net assets, end of period (000s omitted) |
Ratio
of expenses to average net assets with fee waivers and/or expenses absorbed |
Ratio of expenses to average net assets without fee waivers and/or expenses absorbed |
Ratio of net to average |
Portfolio turnover(c) |
|||||||||||||||||||||||||||||||||||||||||||
Series I |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/17 |
$26.38 | $0.56 | $1.65 | $2.21 | $(0.46) | $ | (0.95 | ) | $(1.41) | $27.18 | 8.58 | % | $ | 437,104 | 0.64 | %(d) | 0.65 | %(d) | 2.06 | %(d) | 16 | % | ||||||||||||||||||||||||||||||||||
Year ended 12/31/16 |
23.27 | 0.50 | 2.93 | 3.43 | (0.32 | ) | | (0.32 | ) | 26.38 | 14.81 | 439,857 | 0.66 | 0.68 | 2.02 | 14 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 |
23.21 | 0.43 | 0.04 | 0.47 | (0.41 | ) | | (0.41 | ) | 23.27 | 2.07 | 333,573 | 0.70 | 0.71 | 1.84 | 15 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 |
20.93 | 0.40 | 2.26 | 2.66 | (0.38 | ) | | (0.38 | ) | 23.21 | 12.83 | 330,370 | 0.72 | 0.73 | 1.80 | 6 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 |
16.34 | 0.33 | 4.70 | 5.03 | (0.44 | ) | | (0.44 | ) | 20.93 | 31.04 | 321,581 | 0.71 | 0.72 | 1.76 | 20 | ||||||||||||||||||||||||||||||||||||||||
Series II |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/17 |
26.23 | 0.49 | 1.64 | 2.13 | (0.41 | ) | (0.95 | ) | (1.36 | ) | 27.00 | 8.31 | 242,614 | 0.89 | (d) | 0.90 | (d) | 1.81 | (d) | 16 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/16 |
23.16 | 0.43 | 2.92 | 3.35 | (0.28 | ) | | (0.28 | ) | 26.23 | 14.54 | 215,614 | 0.91 | 0.93 | 1.77 | 14 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 |
23.11 | 0.37 | 0.04 | 0.41 | (0.36 | ) | | (0.36 | ) | 23.16 | 1.82 | 132,477 | 0.95 | 0.96 | 1.59 | 15 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 |
20.85 | 0.34 | 2.25 | 2.59 | (0.33 | ) | | (0.33 | ) | 23.11 | 12.54 | 105,813 | 0.97 | 0.98 | 1.55 | 6 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 |
16.28 | 0.29 | 4.69 | 4.98 | (0.41 | ) | | (0.41 | ) | 20.85 | 30.76 | 97,628 | 0.96 | 0.97 | 1.51 | 20 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year, if applicable and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns. |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. |
(d) | Ratios are based on average daily net assets (000s omitted) of $440,393 and $231,496 for Series I and Series II shares, respectively. |
Invesco V.I. Diversified Dividend Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
and Shareholders of Invesco V.I. Diversified Dividend Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Invesco V.I. Diversified Dividend Fund (one of the funds constituting AIM Variable Insurance Funds (Invesco Variable Insurance Funds), hereafter referred to as the Fund) as of December 31, 2017, the related statement of operations for the year ended December 31, 2017, the statement of changes in net assets for each of the two years in the period ended December 31, 2017, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2017 (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2017 and the financial highlights for each of the five years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Funds management. Our responsibility is to express an opinion on the Funds financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2017 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, TX
February 14, 2018
We have served as the auditor of one or more of the investment companies in the Invesco/PowerShares group of investment companies since at least 1995. We have not determined the specific year we began serving as auditor.
Invesco V.I. Diversified Dividend Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period July 1, 2017 through December 31, 2017.
The actual and hypothetical expenses in the examples below do not represent the effect of any fees or other expenses assessed in connection with a variable product; if they did, the expenses shown would be higher while the ending account values shown would be lower.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled Actual Expenses Paid During Period to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Funds actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs. Therefore, the hypothetical information is useful in comparing ongoing costs, and will not help you determine the relative total costs of owning different funds.
ACTUAL | HYPOTHETICAL (5% annual return before expenses) |
|||||||||||||||||||||||
Class | Beginning Account Value (07/01/17) |
Ending Account Value (12/31/17)1 |
Expenses Paid During Period2 |
Ending Account Value (12/31/17) |
Expenses Paid During Period2 |
Annualized Ratio |
||||||||||||||||||
Series I | $ | 1,000.00 | $ | 1,049.90 | $ | 3.26 | $ | 1,022.03 | $ | 3.21 | 0.63 | % | ||||||||||||
Series II | 1,000.00 | 1,049.10 | 4.55 | 1,020.77 | 4.48 | 0.88 |
1 | The actual ending account value is based on the actual total return of the Fund for the period July 1, 2017 through December 31, 2017, after actual expenses and will differ from the hypothetical ending account value which is based on the Funds expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Funds annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half year. |
Invesco V.I. Diversified Dividend Fund
Tax Information
Form 1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific states requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended December 31, 2017:
Federal and State Income Tax |
||||
Long-Term Capital Gain Distributions |
$ | 23,005,835 | ||
Corporate Dividends Received Deduction* |
100.00 | % | ||
U.S. Treasury Obligations* |
0.00 | % |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Funds fiscal year. |
Invesco V.I. Diversified Dividend Fund
Trustees and Officers
The address of each trustee and officer is AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Trust), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trusts organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 1960 Trustee |
2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business
Formerly: Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US), Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) |
158 | None | ||||
Philip A. Taylor2 1954 Trustee and Senior Vice President |
2006 | Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco Aim Management Group, Inc.) (financial services holding company); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.) (registered transfer agent); Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company); Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management).
Formerly: Co-Chairman, Co-President and Co-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chief Executive Officer and President, Van Kampen Exchange Corp; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurers Series Trust (Invesco Treasurers Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurers Series Trust (Invesco Treasurers Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) (registered broker dealer); Manager, Invesco PowerShares Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco Aim Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurers Series Trust (Invesco Treasurers Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. |
158 | None |
1 | Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser. |
2 | Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser. |
Invesco V.I. Diversified Dividend Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Independent Trustees | ||||||||
Bruce L. Crockett 1944 Trustee and Chair |
1993 | Chairman, Crockett Technologies Associates (technology consulting company)
Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute: Member of the Audit Committee, Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council |
158 | Director and Chairman of the Audit Committee, ALPS (Attorneys Liability Protection Society) (insurance company); Director and Member of the Audit Committee and Compensation Committee, Ferroglobe PLC (metallurgical company) | ||||
David C. Arch 1945 Trustee |
2010 | Chairman of Blistex Inc. (consumer health care products manufacturer); Member, World Presidents Organization | 158 | Board member of the Illinois Manufacturers Association | ||||
Jack M. Fields 1952 Trustee |
1997 | Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Chairman, Discovery Learning Alliance (non-profit)
Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff) (human resources provider); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives |
158 | None | ||||
Cynthia Hostetler 1962 Trustee |
2017 | Non-Executive Director and Trustee of a number of public and private business corporations
Formerly: Head of Investment Funds and Private Equity, Overseas Private Investment Corporation; President, First Manhattan Bancorporation, Inc.; Attorney, Simpson Thacher & Bartlett LLP |
158 | Vulcan Materials Company (construction materials company); Trilinc Global Impact Fund; Aberdeen Investment Funds (4 portfolios); Artio Global Investment LLC (mutual fund complex); Edgen Group, Inc. (specialized energy and infrastructure products distributor) | ||||
Eli Jones 1961 Trustee |
2016 | Professor and Dean, Mays Business School Texas A&M University
Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University; Director, Arvest Bank |
158 | Insperity, Inc. (formerly known as Administaff) (human resources provider) | ||||
Prema Mathai-Davis 1950 Trustee |
1998 | Retired. | 158 | None | ||||
Teresa M. Ressel 1962 Trustee |
2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Chief Financial Officer, Olayan America, The Olayan Group (international investor/commercial/industrial); Chief Executive Officer, UBS Securities LLC; Group Chief Operating Officer, Americas, UBS AG; Assistant Secretary for Management & Budget and CFO, US Department of the Treasury |
158 | Atlantic Power Corporation (power generation company); ON Semiconductor Corp. (semiconductor supplier) | ||||
Ann Barnett Stern 1957 Trustee |
2017 | President and Chief Executive Officer, Houston Endowment Inc. (private philanthropic institution)
Formerly: Executive Vice President and General Counsel, Texas Childrens Hospital; Attorney, Beck, Redden and Secrest, LLP; Business Law Instructor, University of St. Thomas; Attorney, Andrews & Kurth LLP |
158 | Federal Reserve Bank of Dallas | ||||
Raymond Stickel, Jr. 1944 Trustee |
2005 | Retired.
Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios); Partner, Deloitte & Touche |
158 | None | ||||
Robert C. Troccoli 1949 Trustee |
2016 | Adjunct Professor, University of Denver Daniels College of Business
Formerly: Senior Partner, KPMG LLP |
158 | None | ||||
Christopher L. Wilson 1957 Trustee |
2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Managing Partner, CT2, LLC (investing and consulting firm); President/Chief Executive Officer, Columbia Funds, Bank of America Corporation; President/Chief Executive Officer, CDC IXIS Asset Management Services, Inc.; Principal & Director of Operations, Scudder Funds, Scudder, Stevens & Clark, Inc.; Assistant Vice President, Fidelity Investments |
158 | TD Asset Management USA Inc. (mutual fund complex) (22 portfolios); ISO New England, Inc. (non-profit organization managing regional electricity market) |
Invesco V.I. Diversified Dividend Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers | ||||||||
Sheri Morris 1964 President, Principal Executive Officer and Treasurer |
1999 | President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco Aim Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; and Treasurer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust and PowerShares Actively Managed Exchange-Traded Fund Trust |
N/A | N/A | ||||
Russell C. Burk 1958 Senior Vice President and Senior Officer |
2005 | Senior Vice President and Senior Officer, The Invesco Funds | N/A | N/A | ||||
John M. Zerr 1962 Senior Vice President, Chief Legal Officer and Secretary |
2006 | Director, Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Managing Director, Invesco PowerShares Capital Management LLC; Director, Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust; Manager and Secretary, Invesco Indexing LLC
Formerly: Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser); Vice President and Secretary, PBHG Funds (an investment company) and PBHG Insurance Series Fund (an investment company); Chief Operating Officer, General Counsel and Secretary, Old Mutual Investment Partners (a broker-dealer); General Counsel and Secretary, Old Mutual Fund Services (an administrator) and Old Mutual Shareholder Services (a shareholder servicing center); Executive Vice President, General Counsel and Secretary, Old Mutual Capital, Inc. (an investment adviser); and Vice President and Secretary, Old Mutual Advisors Funds (an investment company) |
N/A | N/A | ||||
Gregory G. McGreevey 1962 Senior Vice President |
2012 | Senior Managing Director, Invesco Ltd.; Director, Chairman, President, and Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President, Invesco Management Group, Inc.; Director, Invesco Mortgage Capital, Inc. and Invesco Senior Secured Management, Inc.; and Senior Vice President, The Invesco Funds
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A | ||||
Kelli Gallegos 1970 Vice President, Principal Financial Officer and Assistant Treasurer |
2008 | Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A |
Invesco V.I. Diversified Dividend Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers(continued) | ||||||||
Tracy Sullivan 1962 Vice President, Chief Tax Officer and Assistant Treasurer |
2008 | Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A | ||||
Crissie M. Wisdom 1969 Anti-Money Laundering Compliance Officer |
2013 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., Invesco Management Group, Inc., The Invesco Funds, and PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp. |
N/A | N/A | ||||
Robert R. Leveille 1969 Chief Compliance Officer |
2016 | Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds
Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds |
N/A | N/A |
The Statement of Additional Information of the Trust includes additional information about the Funds Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Funds Statement of Additional Information for information on the Funds sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 |
Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Auditors PricewaterhouseCoopers LLP 1000 Louisiana Street, Suite 5800 Houston, TX 77002-5678 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2005 Market Street, Suite 2600 Philadelphia, PA 19103-7018 |
Counsel to the Independent Trustees Goodwin Procter LLP 901 New York Avenue, N.W. Washington, D.C. 20001 |
Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
Invesco V.I. Diversified Dividend Fund
| ||||
Annual Report to Shareholders
|
December 31, 2017 | |||
| ||||
Invesco V.I. Equally-Weighted S&P 500 Fund
|
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Funds semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The Funds Form N-Q filings are available on the SEC website, sec.gov. Copies of the Funds Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-07452 and 033-57340. The Funds most recent portfolio holdings, as filed on Form N-Q, have also been made available to insurance companies issuing variable annuity contracts and variable life insurance policies (variable products) that invest in the Fund. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/ proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
This report must be accompanied or preceded by a currently effective Fund prospectus and variable product prospectus, which contain more complete information, including sales charges and expenses. Investors should read each carefully before investing.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
Invesco Distributors, Inc. MS-VIEWSP-AR-1 02072018 1148 |
Managements Discussion of Fund Performance
Invesco V.I. Equally-Weighted S&P 500 Fund
Invesco V.I. Equally-Weighted S&P 500 Fund
Your Funds Long-Term Performance
Results of a $10,000 Investment Oldest Share Class(es)
Fund and index data from 12/31/07
1 | Source: FactSet Research Systems Inc. |
2 | Source: Lipper Inc. |
Past performance cannot guarantee
comparable future results.
Invesco V.I. Equally-Weighted S&P 500 Fund
Invesco V.I. Equally-Weighted S&P 500 Funds investment objective is to achieve a high level of total return on its assets through a combination of capital appreciation and current income.
⬛ | Unless otherwise stated, information presented in this report is as of December 31, 2017, and is based on total net assets. |
⬛ | Unless otherwise noted, all data provided by Invesco. |
Invesco V.I. Equally-Weighted S&P 500 Fund
Schedule of Investments(a)
December 31, 2017
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Equally-Weighted S&P 500 Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Equally-Weighted S&P 500 Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Equally-Weighted S&P 500 Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Equally-Weighted S&P 500 Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Equally-Weighted S&P 500 Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Equally-Weighted S&P 500 Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Equally-Weighted S&P 500 Fund
Investment Abbreviations:
REIT | Real Estate Investment Trust |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Equally-Weighted S&P 500 Fund
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poors. |
(b) | All or a portion of this security was out on loan at December 31, 2017. |
(c) | Non-income producing security. |
(d) | The Funds Adviser is a subsidiary of Invesco Ltd. and therefore, Invesco Ltd. is considered to be affiliated with the Fund. The value of this security as of December 31, 2017 represented less than 1% of the Funds Net Assets. See Note 5. |
(e) | All or a portion of the value was pledged as collateral to cover margin requirements for open futures contracts. See Note 1J. |
(f) | The money market fund and the Fund are affiliated by having the same investment adviser. The rate shown is the 7-day SEC standardized yield as of December 31, 2017. |
(g) | The security has been segregated to satisfy the commitment to return the cash collateral received in securities lending transactions upon the borrowers return of the securities loaned. See Note 1I. |
Open Futures Contracts Equity Risk | ||||||||||||||||||||
Long Futures Contracts | Number of Contracts |
Expiration Month |
Notional Value |
Value | Unrealized Appreciation (Depreciation) |
|||||||||||||||
E-Mini S&P 500 Index |
14 | March-2018 | $1,873,200 | $(8,603) | $(8,603) | |||||||||||||||
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Equally-Weighted S&P 500 Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Equally-Weighted S&P 500 Fund
Statement of Changes in Net Assets
For the years ended December 31, 2017 and 2016
2017 | 2016 | |||||||
Operations: |
| |||||||
Net investment income |
$ | 2,917,967 | $ | 1,637,645 | ||||
Net realized gain |
4,516,918 | 4,366,614 | ||||||
Change in net unrealized appreciation |
26,902,954 | 11,005,344 | ||||||
Net increase in net assets resulting from operations |
34,337,839 | 17,009,603 | ||||||
Distributions to shareholders from net investment income: |
| |||||||
Series I |
(959,664 | ) | (658,672 | ) | ||||
Series ll |
(684,524 | ) | (175,080 | ) | ||||
Total distributions from net investment income |
(1,644,188 | ) | (833,752 | ) | ||||
Distributions to shareholders from net realized gains: |
| |||||||
Series l |
(2,321,226 | ) | (4,417,395 | ) | ||||
Series ll |
(1,911,306 | ) | (1,836,209 | ) | ||||
Total distributions from net realized gains |
(4,232,532 | ) | (6,253,604 | ) | ||||
Share transactionsnet: |
| |||||||
Series l |
(3,857,449 | ) | 79,882,936 | |||||
Series ll |
57,119,964 | 6,716,713 | ||||||
Net increase in net assets resulting from share transactions |
53,262,515 | 86,599,649 | ||||||
Net increase in net assets |
81,723,634 | 96,521,896 | ||||||
Net assets: |
| |||||||
Beginning of year |
163,138,407 | 66,616,511 | ||||||
End of year (includes undistributed net investment income of $2,888,900 and $1,611,575, respectively) |
$ | 244,862,041 | $ | 163,138,407 |
Notes to Financial Statements
December 31, 2017
NOTE 1Significant Accounting Policies
Invesco V.I. Equally-Weighted S&P 500 Fund (the Fund) is a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Trust). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end series management investment company consisting of twenty-four separate portfolios, (each constituting a Fund). The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each Fund or class will be voted on exclusively by the shareholders of such Fund or class. Current Securities and Exchange Commission (SEC) guidance, however, requires participating insurance companies offering separate accounts to vote shares proportionally in accordance with the instructions of the contract owners whose investments are funded by shares of each Fund or class.
The Funds investment objective is to achieve a high level of total return on its assets through a combination of capital appreciation and current income.
The Fund currently offers two classes of shares, Series I and Series II, both of which are offered to insurance company separate accounts funding variable annuity contracts and variable life insurance policies (variable products).
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946, Financial Services Investment Companies.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations Securities, including restricted securities, are valued according to the following policy. |
A security listed or traded on an exchange (except convertible securities) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and asked prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and asked prices. For purposes of determining net asset value (NAV) per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (NYSE).
Invesco V.I. Equally-Weighted S&P 500 Fund
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end-of-day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
Debt obligations (including convertible securities) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual trading characteristics and other market data. Pricing services generally value debt obligations assuming orderly transactions of institutional round lot size, but a fund may hold or transact in the same securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Foreign securities (including foreign exchange contracts) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that the investment adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trusts officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/asked quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a securitys fair value.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuers assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
B. | Securities Transactions and Investment Income Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any) is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Funds net asset value and, accordingly, they reduce the Funds total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and the Statement of Changes in Net Assets, or the net investment income per share and the ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. | Country Determination For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuers securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
D. | Distributions Distributions from net investment income and net realized capital gain, if any, are generally declared and paid to separate accounts of participating insurance companies annually and recorded on the ex-dividend date. |
Invesco V.I. Equally-Weighted S&P 500 Fund
E. | Federal Income Taxes The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the Internal Revenue Code), necessary to qualify as a regulated investment company and to distribute substantially all of the Funds taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. |
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Funds uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
F. | Expenses Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
G. | Accounting Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
H. | Indemnifications Under the Trusts organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Funds servicing agreements, that contain a variety of indemnification clauses. The Funds maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
I. | Securities Lending The Fund may lend portfolio securities having a market value up to one-third of the Funds total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily by the securities lending provider. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its sponsored agencies. Cash collateral received in connection with these loans is invested in short-term money market instruments or affiliated money market funds and is shown as such on the Schedule of Investments. The Fund bears the risk of loss with respect to the investment of collateral. It is the Funds policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. When loaning securities, the Fund retains certain benefits of owning the securities, including the economic equivalent of dividends or interest generated by the security. Lending securities entails a risk of loss to the Fund if, and to the extent that, the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower failed to return the securities. The securities loaned are subject to termination at the option of the borrower or the Fund. Upon termination, the borrower will return to the Fund the securities loaned and the Fund will return the collateral. Upon the failure of the borrower to return the securities, collateral may be liquidated and the securities may be purchased on the open market to replace the loaned securities. The Fund could experience delays and costs in gaining access to the collateral and the securities may lose value during the delay which could result in potential losses to the Fund. Some of these losses may be indemnified by the lending agent. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to any loss on the collateral invested. Dividends received on cash collateral investments for securities lending transactions, which are net of compensation to counterparties, are included in Dividends from affiliated money market funds on the Statement of Operations. The aggregate value of securities out on loan, if any, is shown as a footnote on the Statement of Assets and Liabilities. |
J. | Futures Contracts The Fund may enter into futures contracts to manage exposure to interest rate, equity and market price movements and/or currency risks. A futures contract is an agreement between two parties (Counterparties) to purchase or sell a specified underlying security, currency or commodity (or delivery of a cash settlement price, in the case of an index future) for a fixed price at a future date. The Fund currently invests only in exchange-traded futures and they are standardized as to maturity date and underlying financial instrument. Initial margin deposits required upon entering into futures contracts are satisfied by the segregation of specific securities or cash as collateral at the futures commission merchant (broker). During the period the futures contracts are open, changes in the value of the contracts are recognized as unrealized gains or losses by recalculating the value of the contracts on a daily basis. Subsequent or variation margin payments are received or made depending upon whether unrealized gains or losses are incurred. These amounts are reflected as receivables or payables on the Statement of Assets and Liabilities. When the contracts are closed or expire, the Fund recognizes a realized gain or loss equal to the difference between the proceeds from, or cost of, the closing transaction and the Funds basis in the contract. The net realized gain (loss) and the change in unrealized gain (loss) on futures contracts held during the period is included on the Statement of Operations. The primary risks associated with futures contracts are market risk and the absence of a liquid secondary market. If the Fund were unable to liquidate a futures contract and/or enter into an offsetting closing transaction, the Fund would continue to be subject to market risk with respect to the value of the contracts and continue to be required to maintain the margin deposits on the futures contracts. Futures contracts have minimal Counterparty risk since the exchanges clearinghouse, as Counterparty to all exchange-traded futures, guarantees the futures against default. Risks may exceed amounts recognized in the Statement of Assets and Liabilities. |
K. | Collateral To the extent the Fund has designated or segregated a security as collateral and that security is subsequently sold, it is the Funds practice to replace such collateral no later than the next business day. |
Invesco V.I. Equally-Weighted S&P 500 Fund
NOTE 2Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the Adviser or Invesco). Under the terms of the investment advisory agreement, the Fund accrues daily and pays monthly an advisory fee to the Adviser based on the annual rate of the Funds average daily net assets as follows:
Average Daily Net Assets | Rate | |||
First $2 billion |
0.12% | |||
Over $2 billion |
0.10% |
For the year ended December 31, 2017, the effective advisory fees incurred by the Fund was 0.12%.
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. and separate sub-advisory agreements with Invesco PowerShares Capital Management LLC and Invesco Asset Management (India) Private Limited (collectively, the Affiliated Sub-Advisers) the Adviser, not the Fund, will pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2018, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Series I shares to 2.00% and Series II shares to 2.25% of average daily net assets (the expense limits). In determining the Advisers obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on June 30, 2018. During its term, the fee waiver agreement cannot be terminated or amended to increase the expense limits or reduce the advisory fee waiver without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
Further, the Adviser has contractually agreed, through at least June 30, 2019, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the year ended December 31, 2017, the Adviser waived advisory fees of $3,433.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco a fee for costs incurred in providing accounting services and fund administrative services to the Fund and to reimburse Invesco for fees paid to insurance companies that have agreed to provide certain administrative services to the Fund. These administrative services provided by the insurance companies may include, among other things: maintenance of master accounts with the Fund; tracking, recording and transmitting net purchase and redemption orders for Fund shares; maintaining and preserving records related to the purchase, redemption and other account activity of variable product owners; distributing copies of Fund documents such as prospectuses, proxy materials and periodic reports, to variable product owners, and responding to inquiries from variable product owners about the Fund. Pursuant to such agreement, for the year ended December 31, 2017, Invesco was paid $50,000 for accounting and fund administrative services and was reimbursed $163,095 for fees paid to insurance companies.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (IIS) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. For the year ended December 31, 2017, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
The Trust has entered into a master distribution agreement with Invesco Distributors, Inc. (IDI) to serve as the distributor for the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Funds Series II shares (the Plan). The Fund, pursuant to the Plan, pays IDI compensation at the annual rate of 0.25% of the Funds average daily net assets of Series II shares. The fees are accrued daily and paid monthly. Of the Plan payments, up to 0.25% of the average daily net assets of the Series II shares may be paid to insurance companies who furnish continuing personal shareholder services to customers who purchase and own Series II shares of the Fund. For the year ended December 31, 2017, expenses incurred under the Plan are detailed in the Statement of Operations as Distribution fees.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
NOTE 3Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investments assigned level:
Level 1 | Prices are determined using quoted prices in an active market for identical assets. |
Level 2 | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Level 3 | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Funds own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
Invesco V.I. Equally-Weighted S&P 500 Fund
The following is a summary of the tiered valuation input levels, as of December 31, 2017. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
The Funds policy is to recognize transfers in and out of the valuation levels as of the end of the reporting period. During the year ended December 31, 2017, there were no material transfers between valuation levels.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Investments in Securities |
||||||||||||||||
Common Stocks & Other Equity Interests |
$ | 242,937,147 | $ | | $ | | $ | 242,937,147 | ||||||||
Money Market Funds |
6,531,806 | | | 6,531,806 | ||||||||||||
Total Investments in Securities |
249,468,953 | | | 249,468,953 | ||||||||||||
Other Investments Liabilities |
||||||||||||||||
Futures Contracts* |
(8,603 | ) | | | (8,603 | ) | ||||||||||
Total Investments |
$ | 249,460,350 | $ | | $ | | $ | 249,460,350 |
* | Unrealized appreciation (depreciation). |
NOTE 4Derivative Investments
The Fund may enter into an International Swaps and Derivatives Association Master Agreement (ISDA Master Agreement) under which a fund may trade OTC derivatives. An OTC transaction entered into under an ISDA Master Agreement typically involves a collateral posting arrangement, payment netting provisions and close-out netting provisions. These netting provisions allow for reduction of credit risk through netting of contractual obligations. The enforceability of the netting provisions of the ISDA Master Agreement depends on the governing law of the ISDA Master Agreement, among other factors.
For financial reporting purposes, the Fund does not offset OTC derivative assets or liabilities that are subject to ISDA Master Agreements in the Statement of Assets and Liabilities.
Value of Derivative Investments at Period-End
The table below summarizes the value of the Funds derivative investments, detailed by primary risk exposure, held as of December 31, 2017:
Value | ||||
Derivative Liabilities | Equity Risk | |||
Unrealized depreciation on futures contracts Exchange-Traded(a) |
$ | (8,603 | ) | |
Derivatives not subject to master netting agreements |
8,603 | |||
Total Derivative Liabilities subject to master netting agreements |
$ | |
(a) | Only current days variation margin receivable (payable) is reported within the Statement of Assets and Liabilities. |
Effect of Derivative Investments for the year ended December 31, 2017
The table below summarizes the gains (losses) on derivative investments, detailed by primary risk exposure, recognized in earnings during the period:
Location of Gain on Statement of Operations |
||||
Equity Risk | ||||
Realized Gain: |
||||
Futures contracts |
$ | 518,573 | ||
Change in Net Unrealized Appreciation: |
||||
Futures contracts |
17,879 | |||
Total |
$ | 536,452 |
The table below summarizes the average notional value of futures contracts outstanding during the period.
Futures Contracts |
||||
Average notional value |
$ | 2,204,807 |
NOTE 5Investments in Affiliates
The Funds Adviser is a subsidiary of Invesco Ltd. and therefore, Invesco Ltd. is considered to be affiliated with the Fund. The following is a summary of the transactions in, and earnings from, investments in Invesco Ltd. for the year ended December 31, 2017.
Value 12/31/16 |
Purchases at Cost |
Proceeds from Sales |
Change in Unrealized Appreciation |
Realized Gain |
Value 12/31/17 |
Dividend Income |
||||||||||||||||||||||
Invesco Ltd. |
$ | 304,523 | $ | 153,623 | $ | (65,905 | ) | $ | 73,529 | $ | 1,905 | $ | 467,675 | $ | 13,567 |
Invesco V.I. Equally-Weighted S&P 500 Fund
NOTE 6Trustees and Officers Fees and Benefits
Trustees and Officers Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees and Officers Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees were eligible to participate in a retirement plan that provided for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees and Officers Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 7Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period-end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 8Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended December 31, 2017 and 2016:
2017 | 2016 | |||||||
Ordinary income |
$ | 3,672,562 | $ | 985,991 | ||||
Long-term capital gain |
2,204,158 | 6,101,365 | ||||||
Total distributions |
$ | 5,876,720 | $ | 7,087,356 |
Tax Components of Net Assets at Period-End:
2017 | ||||
Undistributed ordinary income |
$ | 5,388,610 | ||
Undistributed long-term gain |
2,375,868 | |||
Net unrealized appreciation investments |
70,980,799 | |||
Temporary book/tax differences |
(30,528 | ) | ||
Shares of beneficial interest |
166,147,292 | |||
Total net assets |
$ | 244,862,041 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Funds net unrealized appreciation difference is attributable primarily to wash sales.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Funds temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund does not have a capital loss carryforward as of December 31, 2017.
NOTE 9Investment Transactions
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended December 31, 2017 was $94,637,723 and $43,555,555, respectively. Cost of investments, including any derivatives, on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investments on a Tax Basis | ||||
Aggregate unrealized appreciation of investments |
$ | 74,132,361 | ||
Aggregate unrealized (depreciation) of investments |
(3,151,562 | ) | ||
Net unrealized appreciation of investments |
$ | 70,980,799 |
Cost of investments for tax purposes is $178,479,551.
Invesco V.I. Equally-Weighted S&P 500 Fund
NOTE 10Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of return of capital, on December 31, 2017, undistributed net investment income was increased by $3,546, and shares of beneficial interest was decreased by $3,546. This reclassification had no effect on the net assets of the Fund.
NOTE 11Share Information
Summary of Share Activity | ||||||||||||||||
Years ended December 31, | ||||||||||||||||
2017(a) | 2016 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: |
||||||||||||||||
Series I |
441,919 | $ | 8,277,046 | 5,223,200 | $ | 86,064,568 | ||||||||||
Series II |
3,562,087 | 64,459,112 | 812,311 | 13,189,348 | ||||||||||||
Issued as reinvestment of dividends: |
||||||||||||||||
Series I |
177,345 | 3,280,890 | 305,052 | 5,076,067 | ||||||||||||
Series II |
144,133 | 2,595,830 | 123,848 | 2,011,289 | ||||||||||||
Reacquired: |
||||||||||||||||
Series I |
(830,573 | ) | (15,415,385 | ) | (674,054 | ) | (11,257,699 | ) | ||||||||
Series II |
(547,921 | ) | (9,934,978 | ) | (529,053 | ) | (8,483,924 | ) | ||||||||
Net increase in share activity |
2,946,990 | $ | 53,262,515 | 5,261,304 | $ | 86,599,649 |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 92% of the outstanding shares of the Fund. The Fund and the Funds principal underwriter or adviser, are parties to participation agreements with these entities whereby these entities sell units of interest in separate accounts funding variable products that are invested in the Fund. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
NOTE 12Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Net asset value, beginning of period |
Net investment income(a) |
Net gains (losses) on securities (both realized and unrealized) |
Total from investment operations |
Dividends from net investment income |
Distributions from net realized gains |
Total distributions |
Net asset value, end of period |
Total return(b) |
Net assets, end of period (000s omitted) |
Ratio of net assets |
Ratio of expenses to average net assets without fee waivers and/or expenses absorbed |
Ratio of net to average |
Portfolio turnover(c) |
|||||||||||||||||||||||||||||||||||||||||||
Series I |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/17 |
$ | 17.24 | $ | 0.29 | $ | 2.87 | $ | 3.16 | $ | (0.15 | ) | $ | (0.37 | ) | $ | (0.52 | ) | $ | 19.88 | 18.58 | % | $ | 127,462 | 0.32 | %(d) | 0.32 | %(d) | 1.55 | %(d) | 22 | % | |||||||||||||||||||||||||
Year ended 12/31/16 |
15.81 | 0.26 | 1.96 | 2.22 | (0.10 | ) | (0.69 | ) | (0.79 | ) | 17.24 | 14.24 | 114,202 | 0.39 | 0.39 | 1.56 | 22 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 |
19.98 | 0.26 | (0.94 | ) | (0.68 | ) | (0.28 | ) | (3.21 | ) | (3.49 | ) | 15.81 | (2.68 | ) | 27,974 | 0.55 | 0.55 | 1.38 | 25 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 |
21.18 | 0.29 | 2.41 | 2.70 | (0.33 | ) | (3.57 | ) | (3.90 | ) | 19.98 | 13.88 | 33,878 | 0.59 | 0.59 | 1.34 | 18 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 |
18.23 | 0.24 | 5.94 | 6.18 | (0.38 | ) | (2.85 | ) | (3.23 | ) | 21.18 | 35.42 | 38,144 | 0.59 | 0.59 | 1.16 | 18 | |||||||||||||||||||||||||||||||||||||||
Series II |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/17 |
16.82 | 0.24 | 2.79 | 3.03 | (0.13 | ) | (0.37 | ) | (0.50 | ) | 19.35 | 18.26 | 117,400 | 0.57 | (d) | 0.57 | (d) | 1.30 | (d) | 22 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/16 |
15.44 | 0.21 | 1.93 | 2.14 | (0.07 | ) | (0.69 | ) | (0.76 | ) | 16.82 | 14.01 | 48,936 | 0.64 | 0.64 | 1.31 | 22 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 |
19.60 | 0.21 | (0.92 | ) | (0.71 | ) | (0.24 | ) | (3.21 | ) | (3.45 | ) | 15.44 | (2.92 | ) | 38,643 | 0.80 | 0.80 | 1.13 | 25 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 |
20.84 | 0.23 | 2.37 | 2.60 | (0.27 | ) | (3.57 | ) | (3.84 | ) | 19.60 | 13.61 | 37,205 | 0.84 | 0.84 | 1.09 | 18 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 |
17.98 | 0.19 | 5.84 | 6.03 | (0.32 | ) | (2.85 | ) | (3.17 | ) | 20.84 | 35.04 | 38,860 | 0.84 | 0.84 | 0.91 | 18 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year, if applicable, and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns. |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. |
(d) | Ratios are based on average daily net assets (000s omitted) of $119,179 and $81,132 for Series I and Series II shares, respectively. |
Invesco V.I. Equally-Weighted S&P 500 Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) and Shareholders of Invesco V.I. Equally-Weighted S&P 500 Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Invesco V.I. Equally-Weighted S&P 500 Fund (one of the funds constituting AIM Variable Insurance Funds (Invesco Variable Insurance Funds), hereafter referred to as the Fund) as of December 31, 2017, the related statement of operations for the year ended December 31, 2017, the statement of changes in net assets for each of the two years in the period ended December 31, 2017, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2017 (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2017 and the financial highlights for each of the five years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Funds management. Our responsibility is to express an opinion on the Funds financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2017 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, TX
February 14, 2018
We have served as the auditor of one or more of the investment companies in the Invesco/PowerShares group of investment companies since at least 1995. We have not determined the specific year we began serving as auditor.
Invesco V.I. Equally-Weighted S&P 500 Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period July 1, 2017 through December 31, 2017.
The actual and hypothetical expenses in the examples below do not represent the effect of any fees or other expenses assessed in connection with a variable product; if they did, the expenses shown would be higher while the ending account values shown would be lower.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled Actual Expenses Paid During Period to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Funds actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs. Therefore, the hypothetical information is useful in comparing ongoing costs, and will not help you determine the relative total costs of owning different funds.
ACTUAL | HYPOTHETICAL (5% annual return before |
|||||||||||||||||||||||
Class | Beginning Account Value (07/01/17) |
Ending Account Value (12/31/17)1 |
Expenses Paid During Period2 |
Ending Account Value |
Expenses Paid During Period2 |
Annualized Ratio |
||||||||||||||||||
Series I |
$ | 1,000.00 | $ | 1,098.50 | $ | 1.59 | $ | 1,023.69 | $ | 1.53 | 0.30 | % | ||||||||||||
Series II |
1,000.00 | 1,097.70 | 2.91 | 1,022.43 | 2.80 | 0.55 |
1 | The actual ending account value is based on the actual total return of the Fund for the period July 1, 2017 through December 31, 2017, after actual expenses and will differ from the hypothetical ending account value which is based on the Funds expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Funds annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half year. |
Invesco V.I. Equally-Weighted S&P 500 Fund
Tax Information
Form 1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific states requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended December 31, 2017:
Federal and State Income Tax |
||||
Long-Term Capital Gain Distributions |
$ | 2,204,158 | ||
Corporate Dividends Received Deduction* |
47.11 | % | ||
U.S. Treasury Obligations* |
0.00 | % |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Funds fiscal year. |
Invesco V.I. Equally-Weighted S&P 500 Fund
Trustees and Officers
The address of each trustee and officer is AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Trust), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trusts organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 1960 Trustee |
2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business
Formerly: Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US), Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) |
158 | None | ||||
Philip A. Taylor2 1954 Trustee and Senior Vice President |
2006 | Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco Aim Management Group, Inc.) (financial services holding company); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.) (registered transfer agent); Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company); Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management).
Formerly: Co-Chairman, Co-President and Co-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chief Executive Officer and President, Van Kampen Exchange Corp; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurers Series Trust (Invesco Treasurers Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurers Series Trust (Invesco Treasurers Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) (registered broker dealer); Manager, Invesco PowerShares Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco Aim Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurers Series Trust (Invesco Treasurers Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. |
158 | None |
1 | Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser. |
2 | Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser. |
Invesco V.I. Equally-Weighted S&P 500 Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Independent Trustees | ||||||||
Bruce L. Crockett 1944 Trustee and Chair |
1993 | Chairman, Crockett Technologies Associates (technology consulting company)
Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute: Member of the Audit Committee, Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council |
158 | Director and Chairman of the Audit Committee, ALPS (Attorneys Liability Protection Society) (insurance company); Director and Member of the Audit Committee and Compensation Committee, Ferroglobe PLC (metallurgical company) | ||||
David C. Arch 1945 Trustee |
2010 | Chairman of Blistex Inc. (consumer health care products manufacturer); Member, World Presidents Organization | 158 | Board member of the Illinois Manufacturers Association | ||||
Jack M. Fields 1952 Trustee |
1997 | Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Chairman, Discovery Learning Alliance (non-profit)
Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff) (human resources provider); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives |
158 | None | ||||
Cynthia Hostetler 1962 Trustee |
2017 | Non-Executive Director and Trustee of a number of public and private business corporations
Formerly: Head of Investment Funds and Private Equity, Overseas Private Investment Corporation; President, First Manhattan Bancorporation, Inc.; Attorney, Simpson Thacher & Bartlett LLP |
158 | Vulcan Materials Company (construction materials company); Trilinc Global Impact Fund; Aberdeen Investment Funds (4 portfolios); Artio Global Investment LLC (mutual fund complex); Edgen Group, Inc. (specialized energy and infrastructure products distributor) | ||||
Eli Jones 1961 Trustee |
2016 | Professor and Dean, Mays Business School Texas A&M University
Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University; Director, Arvest Bank |
158 | Insperity, Inc. (formerly known as Administaff) (human resources provider) | ||||
Prema Mathai-Davis 1950 Trustee |
1998 | Retired. | 158 | None | ||||
Teresa M. Ressel 1962 Trustee |
2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Chief Financial Officer, Olayan America, The Olayan Group (international investor/commercial/industrial); Chief Executive Officer, UBS Securities LLC; Group Chief Operating Officer, Americas, UBS AG; Assistant Secretary for Management & Budget and CFO, US Department of the Treasury |
158 | Atlantic Power Corporation (power generation company); ON Semiconductor Corp. (semiconductor supplier) | ||||
Ann Barnett Stern 1957 Trustee |
2017 | President and Chief Executive Officer, Houston Endowment Inc. (private philanthropic institution)
Formerly: Executive Vice President and General Counsel, Texas Childrens Hospital; Attorney, Beck, Redden and Secrest, LLP; Business Law Instructor, University of St. Thomas; Attorney, Andrews & Kurth LLP |
158 | Federal Reserve Bank of Dallas | ||||
Raymond Stickel, Jr. 1944 Trustee |
2005 | Retired.
Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios); Partner, Deloitte & Touche |
158 | None | ||||
Robert C. Troccoli 1949 Trustee |
2016 | Adjunct Professor, University of Denver Daniels College of Business
Formerly: Senior Partner, KPMG LLP |
158 | None | ||||
Christopher L. Wilson 1957 Trustee |
2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Managing Partner, CT2, LLC (investing and consulting firm); President/Chief Executive Officer, Columbia Funds, Bank of America Corporation; President/Chief Executive Officer, CDC IXIS Asset Management Services, Inc.; Principal & Director of Operations, Scudder Funds, Scudder, Stevens & Clark, Inc.; Assistant Vice President, Fidelity Investments |
158 | TD Asset Management USA Inc. (mutual fund complex) (22 portfolios); ISO New England, Inc. (non-profit organization managing regional electricity market) |
Invesco V.I. Equally-Weighted S&P 500 Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers | ||||||||
Sheri Morris 1964 President, Principal Executive Officer and Treasurer |
1999 | President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco Aim Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; and Treasurer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust and PowerShares Actively Managed Exchange-Traded Fund Trust |
N/A | N/A | ||||
Russell C. Burk 1958 Senior Vice President and Senior Officer |
2005 | Senior Vice President and Senior Officer, The Invesco Funds | N/A | N/A | ||||
John M. Zerr 1962 Senior Vice President, Chief Legal Officer and Secretary |
2006 | Director, Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Managing Director, Invesco PowerShares Capital Management LLC; Director, Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust; Manager and Secretary, Invesco Indexing LLC
Formerly: Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser); Vice President and Secretary, PBHG Funds (an investment company) and PBHG Insurance Series Fund (an investment company); Chief Operating Officer, General Counsel and Secretary, Old Mutual Investment Partners (a broker-dealer); General Counsel and Secretary, Old Mutual Fund Services (an administrator) and Old Mutual Shareholder Services (a shareholder servicing center); Executive Vice President, General Counsel and Secretary, Old Mutual Capital, Inc. (an investment adviser); and Vice President and Secretary, Old Mutual Advisors Funds (an investment company) |
N/A | N/A | ||||
Gregory G. McGreevey 1962 Senior Vice President |
2012 | Senior Managing Director, Invesco Ltd.; Director, Chairman, President, and Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President, Invesco Management Group, Inc.; Director, Invesco Mortgage Capital, Inc. and Invesco Senior Secured Management, Inc.; and Senior Vice President, The Invesco Funds
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A | ||||
Kelli Gallegos 1970 Vice President, Principal Financial Officer and Assistant Treasurer |
2008 | Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A |
Invesco V.I. Equally-Weighted S&P 500 Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers(continued) | ||||||||
Tracy Sullivan 1962 Vice President, Chief Tax Officer and Assistant Treasurer |
2008 | Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A | ||||
Crissie M. Wisdom 1969 Anti-Money Laundering Compliance Officer |
2013 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., Invesco Management Group, Inc., The Invesco Funds, and PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp. |
N/A | N/A | ||||
Robert R. Leveille 1969 Chief Compliance Officer |
2016 | Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds
Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds |
N/A | N/A |
The Statement of Additional Information of the Trust includes additional information about the Funds Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Funds Statement of Additional Information for information on the Funds sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 |
Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Auditors PricewaterhouseCoopers LLP 1000 Louisiana Street, Suite 5800 Houston, TX 77002-5678 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2005 Market Street, Suite 2600 Philadelphia, PA 19103-7018 |
Counsel to the Independent Trustees Goodwin Procter LLP 901 New York Avenue, N.W. Washington, D.C. 20001 |
Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
Invesco V.I. Equally-Weighted S&P 500 Fund
| ||||
Annual Report to Shareholders
|
December 31, 2017 | |||
| ||||
Invesco V.I. Equity and Income Fund
|
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Funds semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The Funds Form N-Q filings are available on the SEC website, sec.gov. Copies of the Funds Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-07452 and 033-57340. The Funds most recent portfolio holdings, as filed on Form N-Q, have also been made available to insurance companies issuing variable annuity contracts and variable life insurance policies (variable products) that invest in the Fund. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
This report must be accompanied or preceded by a currently effective Fund prospectus and variable product prospectus, which contain more complete information, including sales charges and expenses. Investors should read each carefully before investing.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
Invesco Distributors, Inc. |
VK-VIEQI-AR-1 02092018 1037 |
Managements Discussion of Fund Performance
Invesco V.I. Equity and Income Fund
Invesco V.I. Equity and Income Fund
Your Funds Long-Term Performance
Results of a $10,000 Investment - Oldest Share Class(es)
Fund and index data from 12/31/07
1 | Source: FactSet Research Systems Inc. |
2 | Source: Lipper Inc. |
Past performance cannot guarantee
comparable future results.
Invesco V.I. Equity and Income Fund
Invesco V.I. Equity and Income Funds investment objectives are both capital appreciation and current income.
∎ | Unless otherwise stated, information presented in this report is as of December 31, 2017, and is based on total net assets. |
∎ | Unless otherwise noted, all data provided by Invesco. |
Invesco V.I. Equity and Income Fund
Invesco V.I. Equity and Income Fund
Schedule of Investments(a)
December 31, 2017
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Equity and Income Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Equity and Income Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Equity and Income Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Equity and Income Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Equity and Income Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Equity and Income Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Equity and Income Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Equity and Income Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Equity and Income Fund
Investment Abbreviations:
ADR | American Depositary Receipt | |
Conv. | Convertible | |
Ctfs. | Certificates | |
Deb. | Debentures | |
Gtd. | Guaranteed | |
Jr. | Junior | |
Pfd. | Preferred | |
REIT | Real Estate Investment Trust | |
Sec. | Secured | |
Sr. | Senior | |
Sub. | Subordinated | |
Unsec. | Unsecured |
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poors. |
(b) | Non-income producing security. |
(c) | Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended (the 1933 Act). The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The aggregate value of these securities at December 31, 2017 was $73,036,520, which represented 4.65% of the Funds Net Assets. |
(d) | Security has an irrevocable call by the issuer or mandatory put by the holder. Maturity date reflects such call or put. |
(e) | Perpetual bond with no specified maturity date. |
(f) | Exchangeable for a basket of five common stocks. |
(g) | Security traded on a discount basis. The interest rate shown represents the discount rate at the time of purchase by the Fund. |
(h) | All or a portion of the value was pledged as collateral to cover margin requirements for open futures contracts. See Note 1K. |
(i) | The money market fund and the Fund are affiliated by having the same investment adviser. The rate shown is the 7-day SEC standardized yield as of December 31, 2017. |
Open Futures Contracts | ||||||||||||||||||||
Short Futures Contracts | Number of Contracts |
Expiration Month |
Notional Value |
Value | Unrealized Appreciation |
|||||||||||||||
U.S. Treasury 5 Year Notes |
23 | March-2018 | $ | (2,671,773 | ) | $ | 14,710 | $ | 14,710 | |||||||||||
U.S. Treasury 10 Year Notes |
17 | March-2018 | (2,108,797 | ) | 14,171 | 14,171 | ||||||||||||||
Total Futures ContractsInterest Rate Risk |
$ | 28,881 | $ | 28,881 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Equity and Income Fund
Open Forward Foreign Currency Contracts | ||||||||||||||||||||||
Settlement
|
Counterparty |
Contract to | Unrealized Appreciation (Depreciation) |
|||||||||||||||||||
Deliver | Receive | |||||||||||||||||||||
01/19/2018 |
State Street Bank and Trust Co. | USD | 34,733 | AUD | 45,313 | $ | 622 | |||||||||||||||
01/19/2018 |
State Street Bank and Trust Co. | USD | 70,943 | CAD | 91,186 | 1,629 | ||||||||||||||||
01/19/2018 |
State Street Bank and Trust Co. | USD | 51,547 | CHF | 50,571 | 440 | ||||||||||||||||
01/19/2018 |
State Street Bank and Trust Co. | USD | 103,152 | EUR | 87,120 | 1,513 | ||||||||||||||||
01/19/2018 |
State Street Bank and Trust Co. | USD | 100,137 | GBP | 74,555 | 595 | ||||||||||||||||
Subtotal |
4,799 | |||||||||||||||||||||
01/19/2018 |
Bank of New York Mellon (The) | AUD | 3,837,013 | USD | 2,898,864 | (94,949 | ) | |||||||||||||||
01/19/2018 |
Bank of New York Mellon (The) | CAD | 8,086,255 | USD | 6,283,026 | (152,579 | ) | |||||||||||||||
01/19/2018 |
Bank of New York Mellon (The) | CHF | 4,338,306 | USD | 4,384,342 | (75,388 | ) | |||||||||||||||
01/19/2018 |
Bank of New York Mellon (The) | EUR | 7,529,140 | USD | 8,864,057 | (181,433 | ) | |||||||||||||||
01/19/2018 |
Bank of New York Mellon (The) | GBP | 12,014,972 | USD | 16,051,222 | (182,261 | ) | |||||||||||||||
01/19/2018 |
State Street Bank and Trust Co. | AUD | 3,837,044 | USD | 2,899,968 | (93,868 | ) | |||||||||||||||
01/19/2018 |
State Street Bank and Trust Co. | CAD | 8,086,766 | USD | 6,284,986 | (151,026 | ) | |||||||||||||||
01/19/2018 |
State Street Bank and Trust Co. | CHF | 4,338,285 | USD | 4,384,294 | (75,414 | ) | |||||||||||||||
01/19/2018 |
State Street Bank and Trust Co. | EUR | 7,529,136 | USD | 8,868,682 | (176,802 | ) | |||||||||||||||
01/19/2018 |
State Street Bank and Trust Co. | GBP | 12,015,049 | USD | 16,052,370 | (181,217 | ) | |||||||||||||||
Subtotal |
(1,364,937 | ) | ||||||||||||||||||||
Total Forward Foreign Currency ContractsCurrency Risk |
|
$ | (1,360,138 | ) |
Abbreviations:
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Equity and Income Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Equity and Income Fund
Statement of Changes in Net Assets
For the years ended December 31, 2017 and 2016
2017 | 2016 | |||||||
Operations: |
||||||||
Net investment income |
$ | 25,839,989 | $ | 20,269,520 | ||||
Net realized gain |
71,047,538 | 30,804,197 | ||||||
Change in net unrealized appreciation |
59,017,947 | 136,794,055 | ||||||
Net increase in net assets resulting from operations |
155,905,474 | 187,867,772 | ||||||
Distributions to shareholders from net investment income: |
||||||||
Series I |
(2,908,928 | ) | (2,492,252 | ) | ||||
Series ll |
(19,584,973 | ) | (20,095,211 | ) | ||||
Total distributions from net investment income |
(22,493,901 | ) | (22,587,463 | ) | ||||
Distributions to shareholders from net realized gains: |
||||||||
Series l |
(3,156,537 | ) | (4,168,661 | ) | ||||
Series ll |
(24,461,379 | ) | (38,839,725 | ) | ||||
Total distributions from net realized gains |
(27,617,916 | ) | (43,008,386 | ) | ||||
Share transactionsnet: |
||||||||
Series l |
14,958,314 | 48,906,569 | ||||||
Series ll |
(22,591,494 | ) | 75,370,163 | |||||
Net increase (decrease) in net assets resulting from share transactions |
(7,633,180 | ) | 124,276,732 | |||||
Net increase in net assets |
98,160,477 | 246,548,655 | ||||||
Net assets: |
||||||||
Beginning of year |
1,472,097,410 | 1,225,548,755 | ||||||
End of year (includes undistributed net investment income of $25,543,663 and $17,107,128, respectively) |
$ | 1,570,257,887 | $ | 1,472,097,410 |
Notes to Financial Statements
December 31, 2017
NOTE 1Significant Accounting Policies
Invesco V.I. Equity and Income Fund (the Fund) is a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Trust). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end series management investment company consisting of twenty-four separate portfolios, (each constituting a Fund). The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each Fund or class will be voted on exclusively by the shareholders of such Fund or class. Current Securities and Exchange Commission (SEC) guidance, however, requires participating insurance companies offering separate accounts to vote shares proportionally in accordance with the instructions of the contract owners whose investments are funded by shares of each Fund or class.
The Funds investment objectives are both capital appreciation and current income.
The Fund currently offers two classes of shares, Series I and Series II, both of which are offered to insurance company separate accounts funding variable annuity contracts and variable life insurance policies (variable products).
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946, Financial Services Investment Companies.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations Securities, including restricted securities, are valued according to the following policy. |
Debt obligations (including convertible securities) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual trading characteristics and other market data. Pricing services generally value debt obligations assuming orderly transactions of institutional round lot size, but a fund may hold or transact in the same securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
A security listed or traded on an exchange (except convertible securities) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they
Invesco V.I. Equity and Income Fund
may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and asked prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and asked prices. For purposes of determining net asset value (NAV) per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (NYSE).
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end-of-day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
Foreign securities (including foreign exchange contracts) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that the investment adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trusts officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/asked quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a securitys fair value.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuers assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
B. | Securities Transactions and Investment Income Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any) is recorded on the accrual basis from settlement date. Bond premiums and discounts are amortized and/or accreted over the lives of the respective securities. Pay-in-kind interest income and non-cash dividend income received in the form of securities in-lieu of cash are recorded at the fair value of the securities received. Paydown gains and losses on mortgage and asset-backed securities are recorded as adjustments to interest income. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Funds net asset value and, accordingly, they reduce the Funds total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and the Statement of Changes in Net Assets, or the net investment income per share and the ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. | Country Determination For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuers securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
D. | Distributions Distributions from net investment income and net realized capital gain, if any, are generally declared and paid to separate accounts of participating insurance companies annually and recorded on the ex-dividend date. |
Invesco V.I. Equity and Income Fund
E. | Federal Income Taxes The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the Internal Revenue Code), necessary to qualify as a regulated investment company and to distribute substantially all of the Funds taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. |
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Funds uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
F. | Expenses Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
G. | Accounting Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
H. | Indemnifications Under the Trusts organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Funds servicing agreements, that contain a variety of indemnification clauses. The Funds maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
I. | Foreign Currency Translations Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Funds books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. |
The Fund may invest in foreign securities, which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests and are shown in the Statement of Operations.
J. | Forward Foreign Currency Contracts The Fund may engage in foreign currency transactions either on a spot (i.e. for prompt delivery and settlement) basis, or through forward foreign currency contracts, to manage or minimize currency or exchange rate risk. |
The Fund may also enter into forward foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to lock in the U.S. dollar price of that security, or the Fund may also enter into forward foreign currency contracts that do not provide for physical settlement of the two currencies, but instead are settled by a single cash payment calculated as the difference between the agreed upon exchange rate and the spot rate at settlement based upon an agreed upon notional amount (non-deliverable forwards). The Fund will set aside liquid assets in an amount equal to the daily mark-to-market obligation for forward foreign currency contracts.
A forward foreign currency contract is an obligation between two parties (Counterparties) to purchase or sell a specific currency for an agreed-upon price at a future date. The use of forward foreign currency contracts does not eliminate fluctuations in the price of the underlying securities the Fund owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statement of Operations. The primary risks associated with forward foreign currency contracts include failure of the Counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities.
K. | Futures Contracts The Fund may enter into futures contracts to manage exposure to interest rate, equity and market price movements and/or currency risks. A futures contract is an agreement between Counterparties to purchase or sell a specified underlying security, currency or commodity (or delivery of a cash settlement price, in the case of an index future) for a fixed price at a future date. The Fund currently invests only in exchange-traded futures and they are standardized as to maturity date and underlying financial instrument. Initial margin deposits required upon entering into futures contracts are satisfied by the segregation of specific securities or cash as collateral at the futures commission merchant (broker). During the period the futures contracts are open, changes in the value of the contracts are recognized as unrealized gains or losses by recalculating the value of the contracts on a daily basis. Subsequent or variation margin payments are received or made depending upon whether unrealized gains or losses are incurred. These amounts are reflected as receivables or payables on the Statement of Assets and Liabilities. When the contracts are closed or expire, the Fund recognizes a realized gain or loss equal to the difference between the proceeds from, or cost of, the closing transaction and the Funds basis in the contract. The net realized gain (loss) and the change in unrealized gain (loss) on futures contracts held during the period is included on the Statement of Operations. The primary risks associated with futures contracts are |
Invesco V.I. Equity and Income Fund
market risk and the absence of a liquid secondary market. If the Fund were unable to liquidate a futures contract and/or enter into an offsetting closing transaction, the Fund would continue to be subject to market risk with respect to the value of the contracts and continue to be required to maintain the margin deposits on the futures contracts. Futures contracts have minimal Counterparty risk since the exchanges clearinghouse, as Counterparty to all exchange-traded futures, guarantees the futures against default. Risks may exceed amounts recognized in the Statement of Assets and Liabilities. |
L. | Collateral To the extent the Fund has designated or segregated a security as collateral and that security is subsequently sold, it is the Funds practice to replace such collateral no later than the next business day. |
NOTE 2Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the Adviser or Invesco). Under the terms of the investment advisory agreement, the Fund accrues daily and pays monthly an advisory fee to the Adviser based on the annual rate of the Funds average daily net assets as follows:
Average Daily Net Assets | Rate | |||
First $150 million |
0.50% | |||
Next $100 million |
0.45% | |||
Next $100 million |
0.40% | |||
Over $350 million |
0.35% |
For the year ended December 31, 2017, the effective advisory fees incurred by the Fund was 0.37%.
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. and separate sub-advisory agreements with Invesco PowerShares Capital Management LLC and Invesco Asset Management (India) Private Limited (collectively, the Affiliated Sub-Advisers) the Adviser, not the Fund, will pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2018, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Series I shares to 1.50% and Series II shares to 1.75% of average daily net assets (the expense limits). In determining the Advisers obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on June 30, 2018. During its term, the fee waiver agreement cannot be terminated or amended to increase the expense limits or reduce the advisory fee waiver without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
Further, the Adviser has contractually agreed, through at least June 30, 2019, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the year ended December 31, 2017, the Adviser waived advisory fees of $95,906.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco a fee for costs incurred in providing accounting services and fund administrative services to the Fund and to reimburse Invesco for fees paid to insurance companies that have agreed to provide certain administrative services to the Fund. These administrative services provided by the insurance companies may include, among other things: maintenance of master accounts with the Fund; tracking, recording and transmitting net purchase and redemption orders for Fund shares; maintaining and preserving records related to the purchase, redemption and other account activity of variable product owners; distributing copies of Fund documents such as prospectuses, proxy materials and periodic reports, to variable product owners, and responding to inquiries from variable product owners about the Fund. Pursuant to such agreement, for the year ended December 31, 2017, Invesco was paid $352,348 for accounting and fund administrative services and was reimbursed $2,092,200 for fees paid to insurance companies.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (IIS) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. For the year ended December 31, 2017, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
The Trust has entered into a master distribution agreement with Invesco Distributors, Inc. (IDI) to serve as the distributor for the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Funds Series II shares (the Plan). The Fund, pursuant to the Plan, pays IDI compensation at the annual rate of 0.25% of the Funds average daily net assets of Series II shares. The fees are accrued daily and paid monthly. Of the Plan payments, up to 0.25% of the average daily net assets of the Series II shares may be paid to insurance companies who furnish continuing personal shareholder services to customers who purchase and own Series II shares of the Fund. For the year ended December 31, 2017, expenses incurred under the Plan are detailed in the Statement of Operations as Distribution fees.
For the year ended December 31, 2017, the Fund incurred $3,925 in brokerage commissions with Invesco Capital Markets, Inc., an affiliate of the Adviser and IDI, for portfolio transactions executed on behalf of the Fund.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
Invesco V.I. Equity and Income Fund
NOTE 3Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investments assigned level:
Level 1 | Prices are determined using quoted prices in an active market for identical assets. |
Level 2 | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Level 3 | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Funds own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of December 31, 2017. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
The Funds policy is to recognize transfers in and out of the valuation levels as of the end of the reporting period. During the year ended December 31, 2017, there were no material transfers between valuation levels.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Investments in Securities |
||||||||||||||||
Common Stocks & Other Equity Interests |
$ | 980,483,462 | $ | 31,873,618 | $ | | $ | 1,012,357,080 | ||||||||
Bonds & Notes |
| 258,407,125 | | 258,407,125 | ||||||||||||
U.S. Treasury Securities |
| 180,064,612 | | 180,064,612 | ||||||||||||
Preferred Stocks |
4,864,022 | 2,981,563 | | 7,845,585 | ||||||||||||
U.S. Government Sponsored Agency Securities |
| 2,088,248 | | 2,088,248 | ||||||||||||
U.S. Government Sponsored Agency Mortgaged-Backed Securities |
| 2,699 | | 2,699 | ||||||||||||
Money Market Funds |
105,124,450 | | | 105,124,450 | ||||||||||||
Total Investments in Securities |
1,090,471,934 | 475,417,865 | | 1,565,889,799 | ||||||||||||
Other Investments Assets* |
||||||||||||||||
Forward Foreign Currency Contracts |
| 4,799 | | 4,799 | ||||||||||||
Futures Contracts |
28,881 | | | 28,881 | ||||||||||||
28,881 | 4,799 | | 33,680 | |||||||||||||
Other Investments Liabilities* |
||||||||||||||||
Forward Foreign Currency Contracts |
| (1,364,937 | ) | | (1,364,937 | ) | ||||||||||
Total Other Investments |
28,881 | (1,360,138 | ) | | (1,331,257 | ) | ||||||||||
Total Investments |
$ | 1,090,500,815 | $ | 474,057,727 | $ | | $ | 1,564,558,542 |
* | Unrealized appreciation (depreciation). |
NOTE 4Derivative Investments
The Fund may enter into an International Swaps and Derivatives Association Master Agreement (ISDA Master Agreement) under which a fund may trade OTC derivatives. An OTC transaction entered into under an ISDA Master Agreement typically involves a collateral posting arrangement, payment netting provisions and close-out netting provisions. These netting provisions allow for reduction of credit risk through netting of contractual obligations. The enforceability of the netting provisions of the ISDA Master Agreement depends on the governing law of the ISDA Master Agreement, among other factors.
For financial reporting purposes, the Fund does not offset OTC derivative assets or liabilities that are subject to ISDA Master Agreements in the Statement of Assets and Liabilities.
Value of Derivative Investments at Period-End
The table below summarizes the value of the Funds derivative investments, detailed by primary risk exposure, held as of December 31, 2017:
Value | ||||||||||||
Derivative Assets | Currency Risk |
Interest Rate Risk |
Total | |||||||||
Unrealized appreciation on futures contractsExchange-Traded(a) |
$ | | $ | 28,881 | $ | 28,881 | ||||||
Unrealized appreciation on forward foreign currency contracts outstanding |
4,799 | | 4,799 | |||||||||
Total Derivative Assets |
4,799 | 28,881 | 33,680 | |||||||||
Derivatives not subject to master netting agreements |
| (28,881 | ) | (28,881 | ) | |||||||
Total Derivative Assets subject to master netting agreements |
$ | 4,799 | $ | | $ | 4,799 |
Invesco V.I. Equity and Income Fund
Value | ||||||||||||
Derivative Liabilities | Currency Risk |
Interest Rate Risk |
Total | |||||||||
Unrealized depreciation on forward foreign currency contracts outstanding |
$ | (1,364,937 | ) | $ | | $ | (1,364,937 | ) | ||||
Derivatives not subject to master netting agreements |
| | | |||||||||
Total Derivative Liabilities subject to master netting agreements |
$ | (1,364,937 | ) | $ | | $ | (1,364,937 | ) |
(a) | The daily variation margin receivable (payable) at period-end is recorded in the Statement of Assets and Liabilities. |
Offsetting Assets and Liabilities
The table below reflects the Funds exposure to Counterparties subject to either an ISDA Master Agreement or other agreement for OTC derivative transactions as of December 31, 2017.
Financial Derivative Assets |
Financial Derivative Liabilities |
Net Value of |
Collateral (Received)/Pledged |
Net |
||||||||||||||||||||
Counterparty | Forward Foreign Currency Contracts |
Forward Foreign Currency Contracts |
Non-Cash | Cash | ||||||||||||||||||||
Bank of Mellon New York (The) |
$ | | $ | (686,610 | ) | $ | (686,610 | ) | $ | | $ | | $ | (686,610 | ) | |||||||||
State Street Bank and Trust Co. |
4,799 | (678,327 | ) | (673,528 | ) | | | (673,528 | ) | |||||||||||||||
Total |
$ | 4,799 | $ | (1,364,937 | ) | $ | (1,360,138 | ) | $ | | $ | | $ | (1,360,138 | ) |
Effect of Derivative Investments for the year ended December 31, 2017
The table below summarizes the gains (losses) on derivative investments, detailed by primary risk exposure, recognized in earnings during the period:
Location of Gain (Loss) on Statement of Operations |
||||||||||||
Currency Risk |
Interest Rate Risk |
Total | ||||||||||
Realized Gain (Loss): |
||||||||||||
Forward foreign currency contracts |
$ | (2,799,889 | ) | $ | | $ | (2,799,889 | ) | ||||
Futures contracts |
| (36,340 | ) | (36,340 | ) | |||||||
Change in Net Unrealized Appreciation (Depreciation): |
||||||||||||
Forward foreign currency contracts |
(2,881,369 | ) | | (2,881,369 | ) | |||||||
Futures contracts |
| 6,191 | 6,191 | |||||||||
Total |
$ | (5,681,258 | ) | $ | (30,149 | ) | $ | (5,711,407 | ) |
The table below summarizes the average notional value of forward foreign currency contracts and futures contracts outstanding during the period.
Forward Foreign Currency Contracts |
Futures Contracts |
|||||||
Average notional value |
$ | 84,640,801 | $ | 5,279,938 |
NOTE 5Trustees and Officers Fees and Benefits
Trustees and Officers Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees and Officers Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees were eligible to participate in a retirement plan that provided for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees and Officers Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 6Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period-end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
Invesco V.I. Equity and Income Fund
NOTE 7Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended December 31, 2017 and 2016:
2017 | 2016 | |||||||
Ordinary income |
$ | 22,493,901 | $ | 22,587,463 | ||||
Long-term capital gain |
27,617,916 | 43,008,386 | ||||||
Total distributions |
$ | 50,111,817 | $ | 65,595,849 |
Tax Components of Net Assets at Period-End:
2017 | ||||
Undistributed ordinary income |
$ | 28,549,182 | ||
Undistributed long-term gain |
62,482,969 | |||
Net unrealized appreciation investments |
332,433,812 | |||
Net unrealized appreciation foreign currencies |
7,880 | |||
Temporary book/tax differences |
(152,000 | ) | ||
Shares of beneficial interest |
1,146,936,044 | |||
Total net assets |
$ | 1,570,257,887 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Funds net unrealized appreciation difference is attributable primarily to wash sales, book to tax accretion and amortization differences, contingent payment debt instruments, forward foreign currency contracts and futures contracts.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Funds temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund does not have a capital loss carryforward as of December 31, 2017.
NOTE 8Investment Transactions
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended December 31, 2017 was $258,274,272 and $363,856,806, respectively. During the same period, purchases and sales of U.S. Treasury obligations were $1,442,850,956 and $1,408,831,089, respectively. Cost of investments, including any derivatives, on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investments on a Tax Basis | ||||
Aggregate unrealized appreciation of investments |
$ | 353,233,814 | ||
Aggregate unrealized (depreciation) of investments |
(20,800,002 | ) | ||
Net unrealized appreciation of investments |
$ | 332,433,812 |
Cost of investments for tax purposes is $1,232,124,730.
NOTE 9Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of contingent payment debt instruments, bond premiums and sale of securities with deemed dividends, on December 31, 2017, undistributed net investment income was increased by $5,090,447 and undistributed net realized gain was decreased by $5,090,447. This reclassification had no effect on the net assets of the Fund.
Invesco V.I. Equity and Income Fund
NOTE 10Share Information
Summary of Share Activity | ||||||||||||||||
Years ended December 31, | ||||||||||||||||
2017(a) | 2016 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: |
||||||||||||||||
Series I |
1,444,387 | $ | 26,450,705 | 3,385,579 | $ | 56,340,459 | ||||||||||
Series II |
3,955,635 | 72,128,100 | 11,160,205 | 184,995,192 | ||||||||||||
Issued as reinvestment of dividends: |
||||||||||||||||
Series I |
331,991 | 6,065,465 | 401,502 | 6,660,913 | ||||||||||||
Series II |
2,420,129 | 44,046,353 | 3,565,332 | 58,934,936 | ||||||||||||
Reacquired: |
||||||||||||||||
Series I |
(955,203 | ) | (17,557,856 | ) | (835,357 | ) | (14,094,803 | ) | ||||||||
Series II |
(7,581,250 | ) | (138,765,947 | ) | (10,264,860 | ) | (168,559,965 | ) | ||||||||
Net increase (decrease) in share activity |
(384,311 | ) | $ | (7,633,180 | ) | 7,412,401 | $ | 124,276,732 |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 77% of the outstanding shares of the Fund. The Fund and the Funds principal underwriter or adviser, are parties to participation agreements with these entities whereby these entities sell units of interest in separate accounts funding variable products that are invested in the Fund. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
Invesco V.I. Equity and Income Fund
NOTE 11Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Net asset value, beginning of period |
Net investment income(a) |
Net gains (losses) on securities (both realized and unrealized) |
Total from investment operations |
Dividends from net investment income |
Distributions from net realized gains |
Total distributions |
Net asset value, end of period |
Total return(b) |
Net assets, end of period (000s omitted) |
Ratio
of expenses to average net assets with fee waivers and/or expenses absorbed |
Ratio of expenses to average net assets without fee waivers and/or expenses absorbed |
Ratio of net investment income to average net assets |
Portfolio turnover(c) |
|||||||||||||||||||||||||||||||||||||||||||
Series I |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/17 |
$ | 17.76 | $ | 0.35 | (d) | $ | 1.58 | $ | 1.93 | $ | (0.31 | ) | $ | (0.34 | ) | $ | (0.65 | ) | $ | 19.04 | 11.03 | % | $ | 184,768 | 0.55 | %(e) | 0.56 | %(e) | 1.93 | %(d)(e) | 119 | % | ||||||||||||||||||||||||
Year ended 12/31/16 |
16.23 | 0.29 | 2.10 | 2.39 | (0.32 | ) | (0.54 | ) | (0.86 | ) | 17.76 | 15.12 | 157,774 | 0.60 | 0.61 | 1.78 | 101 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 |
18.93 | 0.28 | (0.78 | ) | (0.50 | ) | (0.49 | ) | (1.71 | ) | (2.20 | ) | 16.23 | (2.29 | ) | 96,287 | 0.64 | 0.65 | 1.55 | 87 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 |
18.58 | 0.37 | (f) | 1.28 | 1.65 | (0.35 | ) | (0.95 | ) | (1.30 | ) | 18.93 | 9.03 | 72,391 | 0.66 | 0.67 | 1.92 | (f) | 85 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 |
15.08 | 0.27 | 3.51 | 3.78 | (0.28 | ) | | (0.28 | ) | 18.58 | 25.18 | 60,288 | 0.66 | 0.67 | 1.59 | 41 | ||||||||||||||||||||||||||||||||||||||||
Series II |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/17 |
17.68 | 0.31 | (d) | 1.57 | 1.88 | (0.27 | ) | (0.34 | ) | (0.61 | ) | 18.95 | 10.78 | 1,385,490 | 0.80 | (e) | 0.81 | (e) | 1.68 | (d)(e) | 119 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/16 |
16.16 | 0.25 | 2.09 | 2.34 | (0.28 | ) | (0.54 | ) | (0.82 | ) | 17.68 | 14.84 | 1,314,323 | 0.85 | 0.86 | 1.53 | 101 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 |
18.86 | 0.23 | (0.78 | ) | (0.55 | ) | (0.44 | ) | (1.71 | ) | (2.15 | ) | 16.16 | (2.58 | ) | 1,129,261 | 0.89 | 0.90 | 1.30 | 87 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 |
18.52 | 0.32 | (f) | 1.28 | 1.60 | (0.31 | ) | (0.95 | ) | (1.26 | ) | 18.86 | 8.77 | 1,290,920 | 0.91 | 0.92 | 1.67 | (f) | 85 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 |
15.05 | 0.23 | 3.50 | 3.73 | (0.26 | ) | | (0.26 | ) | 18.52 | 24.88 | 1,244,045 | 0.91 | 0.92 | 1.34 | 41 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year, if applicable, and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns. |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. |
(d) | Net investment income per share and the ratio of net investment income to average net assets includes significant dividends received during the year ended December 31, 2017. Net investment income per share and the ratio of net investment income to average net assets excluding the significant dividends are $0.30 and 1.64% and $0.26 and 1.39% for Series I and Series II shares, respectively. |
(e) | Ratios are based on average daily net assets (000s omitted) of $172,121 and $1,345,942 for Series I and Series II shares, respectively. |
(f) | Net investment income per share and the ratio of net investment income to average net assets includes significant dividends received during the year ended December 31, 2014. Net investment income per share and the ratio of net investment income to average net assets excluding the significant dividends are $0.27 and 1.41% and $0.22 and 1.16% for Series I and Series II shares, respectively. |
Invesco V.I. Equity and Income Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
and Shareholders of Invesco V.I. Equity & Income Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Invesco V.I. Equity & Income Fund (one of the funds constituting AIM Variable Insurance Funds (Invesco Variable Insurance Funds), hereafter referred to as the Fund) as of December 31, 2017, the related statement of operations for the year ended December 31, 2017, the statement of changes in net assets for each of the two years in the period ended December 31, 2017, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2017 (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2017 and the financial highlights for each of the five years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Funds management. Our responsibility is to express an opinion on the Funds financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2017 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, TX
February 14, 2018
We have served as the auditor of one or more of the investment companies in the Invesco/PowerShares group of investment companies since at least 1995. We have not determined the specific year we began serving as auditor.
Invesco V.I. Equity and Income Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period July 1, 2017 through December 31, 2017.
The actual and hypothetical expenses in the examples below do not represent the effect of any fees or other expenses assessed in connection with a variable product; if they did, the expenses shown would be higher while the ending account values shown would be lower.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled Actual Expenses Paid During Period to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Funds actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs. Therefore, the hypothetical information is useful in comparing ongoing costs, and will not help you determine the relative total costs of owning different funds.
Class |
Beginning |
ACTUAL | HYPOTHETICAL (5% annual return before |
Annualized |
||||||||||||||||||||
Ending Account Value (12/31/17)1 |
Expenses Paid During Period2 |
Ending Account Value (12/31/17) |
Expenses Paid During Period2 |
|||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 1,066.50 | $ | 2.81 | $ | 1,022.48 | $ | 2.75 | 0.54 | % | ||||||||||||
Series II | 1,000.00 | 1,065.00 | 4.11 | 1,021.22 | 4.02 | 0.79 |
1 | The actual ending account value is based on the actual total return of the Fund for the period July 1, 2017 through December 31, 2017, after actual expenses and will differ from the hypothetical ending account value which is based on the Funds expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Funds annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half year. |
Invesco V.I. Equity and Income Fund
Tax Information
Form 1099-DIV, Form 1042-S and other yearend tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific states requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended December 31, 2017:
Federal and State Income Tax |
||||
Long-Term Capital Gain Distributions |
$ | 27,617,916 | ||
Corporate Dividends Received Deduction* |
68.58 | % | ||
U.S. Treasury Obligations* |
6.79 | % |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Funds fiscal year. |
Invesco V.I. Equity and Income Fund
Trustees and Officers
The address of each trustee and officer is AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Trust), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trusts organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 1960 Trustee |
2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business
Formerly: Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US), Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) |
158 | None | ||||
Philip A. Taylor2 1954 Trustee and Senior Vice President |
2006 | Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco Aim Management Group, Inc.) (financial services holding company); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.) (registered transfer agent); Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company); Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management).
Formerly: Co-Chairman, Co-President and Co-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chief Executive Officer and President, Van Kampen Exchange Corp; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurers Series Trust (Invesco Treasurers Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurers Series Trust (Invesco Treasurers Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) (registered broker dealer); Manager, Invesco PowerShares Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco Aim Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurers Series Trust (Invesco Treasurers Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. |
158 | None |
1 | Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser. |
2 | Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser. |
Invesco V.I. Equity and Income Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Independent Trustees | ||||||||
Bruce L. Crockett 1944 Trustee and Chair |
1993 | Chairman, Crockett Technologies Associates (technology consulting company)
Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute: Member of the Audit Committee, Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council |
158 | Director and Chairman of the Audit Committee, ALPS (Attorneys Liability Protection Society) (insurance company); Director and Member of the Audit Committee and Compensation Committee, Ferroglobe PLC (metallurgical company) | ||||
David C. Arch 1945 Trustee |
2010 | Chairman of Blistex Inc. (consumer health care products manufacturer); Member, World Presidents Organization | 158 | Board member of the Illinois Manufacturers Association | ||||
Jack M. Fields 1952 Trustee |
1997 | Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Chairman, Discovery Learning Alliance (non-profit)
Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff) (human resources provider); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives |
158 | None | ||||
Cynthia Hostetler 1962 Trustee |
2017 | Non-Executive Director and Trustee of a number of public and private business corporations
Formerly: Head of Investment Funds and Private Equity, Overseas Private Investment Corporation; President, First Manhattan Bancorporation, Inc.; Attorney, Simpson Thacher & Bartlett LLP |
158 | Vulcan Materials Company (construction materials company); Trilinc Global Impact Fund; Aberdeen Investment Funds (4 portfolios); Artio Global Investment LLC (mutual fund complex); Edgen Group, Inc. (specialized energy and infrastructure products distributor) | ||||
Eli Jones 1961 Trustee |
2016 | Professor and Dean, Mays Business School Texas A&M University
Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University; Director, Arvest Bank |
158 | Insperity, Inc. (formerly known as Administaff) (human resources provider) | ||||
Prema Mathai-Davis 1950 Trustee |
1998 | Retired. | 158 | None | ||||
Teresa M. Ressel 1962 Trustee |
2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Chief Financial Officer, Olayan America, The Olayan Group (international investor/commercial/industrial); Chief Executive Officer, UBS Securities LLC; Group Chief Operating Officer, Americas, UBS AG; Assistant Secretary for Management & Budget and CFO, US Department of the Treasury |
158 | Atlantic Power Corporation (power generation company); ON Semiconductor Corp. (semiconductor supplier) | ||||
Ann Barnett Stern 1957 Trustee |
2017 | President and Chief Executive Officer, Houston Endowment Inc. (private philanthropic institution)
Formerly: Executive Vice President and General Counsel, Texas Childrens Hospital; Attorney, Beck, Redden and Secrest, LLP; Business Law Instructor, University of St. Thomas; Attorney, Andrews & Kurth LLP |
158 | Federal Reserve Bank of Dallas | ||||
Raymond Stickel, Jr. 1944 Trustee |
2005 | Retired.
Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios); Partner, Deloitte & Touche |
158 | None | ||||
Robert C. Troccoli 1949 Trustee |
2016 | Adjunct Professor, University of Denver Daniels College of Business
Formerly: Senior Partner, KPMG LLP |
158 | None | ||||
Christopher L. Wilson 1957 Trustee |
2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Managing Partner, CT2, LLC (investing and consulting firm); President/Chief Executive Officer, Columbia Funds, Bank of America Corporation; President/Chief Executive Officer, CDC IXIS Asset Management Services, Inc.; Principal & Director of Operations, Scudder Funds, Scudder, Stevens & Clark, Inc.; Assistant Vice President, Fidelity Investments |
158 | TD Asset Management USA Inc. (mutual fund complex) (22 portfolios); ISO New England, Inc. (non-profit organization managing regional electricity market) |
Invesco V.I. Equity and Income Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers | ||||||||
Sheri Morris 1964 President, Principal Executive Officer and Treasurer |
1999 | President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco Aim Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; and Treasurer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust and PowerShares Actively Managed Exchange-Traded Fund Trust |
N/A | N/A | ||||
Russell C. Burk 1958 Senior Vice President and Senior Officer |
2005 | Senior Vice President and Senior Officer, The Invesco Funds | N/A | N/A | ||||
John M. Zerr 1962 Senior Vice President, Chief Legal Officer and Secretary |
2006 | Director, Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Managing Director, Invesco PowerShares Capital Management LLC; Director, Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust; Manager and Secretary, Invesco Indexing LLC
Formerly: Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser); Vice President and Secretary, PBHG Funds (an investment company) and PBHG Insurance Series Fund (an investment company); Chief Operating Officer, General Counsel and Secretary, Old Mutual Investment Partners (a broker-dealer); General Counsel and Secretary, Old Mutual Fund Services (an administrator) and Old Mutual Shareholder Services (a shareholder servicing center); Executive Vice President, General Counsel and Secretary, Old Mutual Capital, Inc. (an investment adviser); and Vice President and Secretary, Old Mutual Advisors Funds (an investment company) |
N/A | N/A | ||||
Gregory G. McGreevey 1962 Senior Vice President |
2012 | Senior Managing Director, Invesco Ltd.; Director, Chairman, President, and Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President, Invesco Management Group, Inc.; Director, Invesco Mortgage Capital, Inc. and Invesco Senior Secured Management, Inc.; and Senior Vice President, The Invesco Funds
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A | ||||
Kelli Gallegos 1970 Vice President, Principal Financial Officer and Assistant Treasurer |
2008 | Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A |
Invesco V.I. Equity and Income Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers(continued) | ||||||||
Tracy Sullivan 1962 Vice President, Chief Tax Officer and Assistant Treasurer |
2008 | Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A | ||||
Crissie M. Wisdom 1969 Anti-Money Laundering Compliance Officer |
2013 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., Invesco Management Group, Inc., The Invesco Funds, and PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp. |
N/A | N/A | ||||
Robert R. Leveille 1969 Chief Compliance Officer |
2016 | Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds
Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds |
N/A | N/A |
The Statement of Additional Information of the Trust includes additional information about the Funds Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Funds Statement of Additional Information for information on the Funds sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 |
Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Auditors PricewaterhouseCoopers LLP 1000 Louisiana Street, Suite 5800 Houston, TX 77002-5678 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2005 Market Street, Suite 2600 Philadelphia, PA 19103-7018 |
Counsel to the Independent Trustees Goodwin Procter LLP 901 New York Avenue, N.W. Washington, D.C. 20001 |
Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
Invesco V.I. Equity and Income Fund
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Annual Report to Shareholders
|
December 31, 2017 | |||
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Invesco V.I. Global Core Equity Fund
|
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Funds semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The Funds Form N-Q filings are available on the SEC website, sec.gov. Copies of the Funds Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-07452 and 033-57340. The Funds most recent portfolio holdings, as filed on Form N-Q, have also been made available to insurance companies issuing variable annuity contracts and variable life insurance policies (variable products) that invest in the Fund. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/ proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
This report must be accompanied or preceded by a currently effective Fund prospectus and variable product prospectus, which contain more complete information, including sales charges and expenses. Investors should read each carefully before investing.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE | ||
Invesco Distributors, Inc. VIGCE-AR-1 02072018 1324 |
Managements Discussion of Fund Performance
Invesco V.I. Global Core Equity Fund
Invesco V.I. Global Core Equity Fund
Your Funds Long-Term Performance
Results of a $10,000 Investment Oldest Share Class(es)
Fund and index data from 12/31/07
1 | Source: FactSet Research Systems Inc. |
2 | Source: Lipper Inc. |
Invesco V.I. Global Core Equity Fund
Invesco V.I. Global Core Equity Funds investment objective is long-term capital appreciation by investing primarily in equity securities of issuers throughout the world, including US issuers.
∎ | Unless otherwise stated, information presented in this report is as of December 31, 2017, and is based on total net assets. |
∎ | Unless otherwise noted, all data provided by Invesco. |
Invesco V.I. Global Core Equity Fund
Invesco V.I. Global Core Equity Fund
Schedule of Investments
December 31, 2017
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Global Core Equity Fund
Investment Abbreviations:
ADR | American Depositary Receipt |
Notes to Schedule of Investments:
(a) | Non-income producing security. |
Open Forward Foreign Currency Contracts | ||||||||||||||||||||||
Contract to |
Unrealized |
|||||||||||||||||||||
Settlement Date |
Counterparty | Deliver | Receive | |||||||||||||||||||
02/13/2018 |
Barclays Bank PLC | USD | 2,017,725 | GBP | 1,500,000 | $ | 10,499 | |||||||||||||||
02/13/2018 |
Goldman Sachs International | JPY | 202,000,000 | USD | 1,847,271 | 50,498 | ||||||||||||||||
02/13/2018 |
JPMorgan Chase Bank, N.A. | JPY | 202,000,000 | USD | 1,846,970 | 50,197 | ||||||||||||||||
Subtotal |
111,194 | |||||||||||||||||||||
02/13/2018 |
Barclays Bank PLC | GBP | 1,500,000 | USD | 1,972,184 | (56,040 | ) | |||||||||||||||
Total Forward Foreign Currency Contracts Currency Risk |
$ | 55,154 |
Abbreviations:
GBP | British Pound Sterling | |
JPY | Japanese Yen | |
USD | U.S. Dollar |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Global Core Equity Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Global Core Equity Fund
Statement of Changes in Net Assets
For the years ended December 31, 2017 and 2016
2017 | 2016 | |||||||
Operations: |
||||||||
Net investment income |
$ | 732,311 | $ | 814,541 | ||||
Net realized gain (loss) |
4,600,551 | (1,489,662 | ) | |||||
Change in net unrealized appreciation |
11,232,447 | 5,373,049 | ||||||
Net increase in net assets resulting from operations |
16,565,309 | 4,697,928 | ||||||
Distributions to shareholders from net investment income: |
||||||||
Series I |
(788,459 | ) | (635,642 | ) | ||||
Series ll |
(112,894 | ) | (91,204 | ) | ||||
Total distributions from net investment income |
(901,353 | ) | (726,846 | ) | ||||
Share transactionsnet: |
||||||||
Series l |
(1,609,008 | ) | (6,324,862 | ) | ||||
Series ll |
(1,728,127 | ) | (1,667,057 | ) | ||||
Net increase (decrease) in net assets resulting from share transactions |
(3,337,135 | ) | (7,991,919 | ) | ||||
Net increase (decrease) in net assets |
12,326,821 | (4,020,837 | ) | |||||
Net assets: |
||||||||
Beginning of year |
74,432,409 | 78,453,246 | ||||||
End of year (includes undistributed net investment income of $691,138 and $833,613, respectively) |
$ | 86,759,230 | $ | 74,432,409 |
Notes to Financial Statements
December 31, 2017
NOTE 1Significant Accounting Policies
Invesco V.I. Global Core Equity Fund (the Fund) is a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Trust). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end series management investment company consisting of twenty-four separate portfolios, (each constituting a Fund). The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each Fund or class will be voted on exclusively by the shareholders of such Fund or class. Current Securities and Exchange Commission (SEC) guidance, however, requires participating insurance companies offering separate accounts to vote shares proportionally in accordance with the instructions of the contract owners whose investments are funded by shares of each Fund or class.
The Funds investment objective is long-term capital appreciation by investing primarily in equity securities of issuers throughout the world, including U.S. issuers.
The Fund currently offers two classes of shares, Series I and Series II, both of which are offered to insurance company separate accounts funding variable annuity contracts and variable life insurance policies (variable products).
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946, Financial Services Investment Companies.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations Securities, including restricted securities, are valued according to the following policy. |
A security listed or traded on an exchange (except convertible securities) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and asked prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and asked prices. For purposes of determining net asset value (NAV) per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (NYSE).
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end-of-day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
Debt obligations (including convertible securities) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual
Invesco V.I. Global Core Equity Fund
trading characteristics and other market data. Pricing services generally value debt obligations assuming orderly transactions of institutional round lot size, but a fund may hold or transact in the same securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Foreign securities (including foreign exchange contracts) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that the investment adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trusts officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/asked quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a securitys fair value.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuers assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
B. | Securities Transactions and Investment Income Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any) is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Funds net asset value and, accordingly, they reduce the Funds total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and the Statement of Changes in Net Assets, or the net investment income per share and the ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. | Country Determination For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuers securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
D. | Distributions Distributions from net investment income and net realized capital gain, if any, are generally declared and paid to separate accounts of participating insurance companies annually and recorded on the ex-dividend date. |
E. | Federal Income Taxes The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the Internal Revenue Code), necessary to qualify as a regulated investment company and to distribute substantially all of the Funds taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. |
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Funds uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
Invesco V.I. Global Core Equity Fund
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
F. | Expenses Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
G. | Accounting Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
H. | Indemnifications Under the Trusts organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Funds servicing agreements, that contain a variety of indemnification clauses. The Funds maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
I. | Securities Lending The Fund may lend portfolio securities having a market value up to one-third of the Funds total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily by the securities lending provider. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its sponsored agencies. Cash collateral received in connection with these loans is invested in short-term money market instruments or affiliated money market funds and is shown as such on the Schedule of Investments. The Fund bears the risk of loss with respect to the investment of collateral. It is the Funds policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. When loaning securities, the Fund retains certain benefits of owning the securities, including the economic equivalent of dividends or interest generated by the security. Lending securities entails a risk of loss to the Fund if, and to the extent that, the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower failed to return the securities. The securities loaned are subject to termination at the option of the borrower or the Fund. Upon termination, the borrower will return to the Fund the securities loaned and the Fund will return the collateral. Upon the failure of the borrower to return the securities, collateral may be liquidated and the securities may be purchased on the open market to replace the loaned securities. The Fund could experience delays and costs in gaining access to the collateral and the securities may lose value during the delay which could result in potential losses to the Fund. Some of these losses may be indemnified by the lending agent. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to any loss on the collateral invested. Dividends received on cash collateral investments for securities lending transactions, which are net of compensation to counterparties, are included in Dividends from affiliated money market funds on the Statement of Operations. The aggregate value of securities out on loan, if any, is shown as a footnote on the Statement of Assets and Liabilities. |
J. | Foreign Currency Translations Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Funds books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. |
The Fund may invest in foreign securities, which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests and are shown in the Statement of Operations.
K. | Forward Foreign Currency Contracts The Fund may engage in foreign currency transactions either on a spot (i.e. for prompt delivery and settlement) basis, or through forward foreign currency contracts, to manage or minimize currency or exchange rate risk. |
The Fund may also enter into forward foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to lock in the U.S. dollar price of that security, or the Fund may also enter into forward foreign currency contracts that do not provide for physical settlement of the two currencies, but instead are settled by a single cash payment calculated as the difference between the agreed upon exchange rate and the spot rate at settlement based upon an agreed upon notional amount (non-deliverable forwards). The Fund will set aside liquid assets in an amount equal to the daily mark-to-market obligation for forward foreign currency contracts.
A forward foreign currency contract is an obligation between two parties (Counterparties) to purchase or sell a specific currency for an agreed-upon price at a future date. The use of forward foreign currency contracts does not eliminate fluctuations in the price of the underlying securities the Fund owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statement of Operations. The primary risks associated with forward foreign currency contracts include failure of the Counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities.
Invesco V.I. Global Core Equity Fund
NOTE 2Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the Adviser or Invesco). Under the terms of the investment advisory agreement, the Fund accrues daily and pays monthly an advisory fee to the Adviser based on the annual rate of the Funds average daily net assets as follows:
Average Daily Net Assets | Rate | |||||||
First $1 billion |
0 | .67% | ||||||
Next $500 million |
0 | .645% | ||||||
Next $1 billion |
0 | .62% | ||||||
Next $1 billion |
0 | .595% | ||||||
Next $1 billion |
0 | .57% | ||||||
Over $4.5 billion |
0 | .545% |
For the year ended December 31, 2017, the effective advisory fees incurred by the Fund was 0.67%.
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. and separate sub-advisory agreements with Invesco PowerShares Capital Management LLC and Invesco Asset Management (India) Private Limited (collectively, the Affiliated Sub-Advisers) the Adviser, not the Fund, will pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2018, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Series I shares to 2.25% and Series II shares to 2.50% of average daily net assets (the expense limits). In determining the Advisers obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on June 30, 2018. During its term, the fee waiver agreement cannot be terminated or amended to increase the expense limits or reduce the advisory fee waiver without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
The Adviser has contractually agreed, through at least June 30, 2019, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the year ended December 31, 2017, the Adviser waived advisory fees of $469.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco a fee for costs incurred in providing accounting services and fund administrative services to the Fund and to reimburse Invesco for fees paid to insurance companies that have agreed to provide certain administrative services to the Fund. These administrative services provided by the insurance companies may include, among other things: maintenance of master accounts with the Fund; tracking, recording and transmitting net purchase and redemption orders for Fund shares; maintaining and preserving records related to the purchase, redemption and other account activity of variable product owners; distributing copies of Fund documents such as prospectuses, proxy materials and periodic reports, to variable product owners, and responding to inquiries from variable product owners about the Fund. Pursuant to such agreement, for the year ended December 31, 2017, Invesco was paid $50,000 for accounting and fund administrative services and was reimbursed $120,856 for fees paid to insurance companies.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (IIS) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. For the year ended December 31, 2017, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
The Trust has entered into a master distribution agreement with Invesco Distributors, Inc. (IDI) to serve as the distributor for the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Funds Series II shares (the Plan). The Fund, pursuant to the Plan, pays IDI compensation at the annual rate of 0.25% of the Funds average daily net assets of Series II shares. The fees are accrued daily and paid monthly. Of the Plan payments, up to 0.25% of the average daily net assets of the Series II shares may be paid to insurance companies who furnish continuing personal shareholder services to customers who purchase and own Series II shares of the Fund. For the year ended December 31, 2017, expenses incurred under the Plan are detailed in the Statement of Operations as Distribution fees.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
Invesco V.I. Global Core Equity Fund
NOTE 3Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investments assigned level:
Level 1 | Prices are determined using quoted prices in an active market for identical assets. |
Level 2 | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Level 3 | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Funds own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of December 31, 2017. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
The Funds policy is to recognize transfers in and out of the valuation levels as of the end of the reporting period. During the year ended December 31, 2017, there were transfers from Level 1 to Level 2 of $4,455,230 and from Level 2 to Level 1 of $5,115,921, due to foreign fair value adjustments.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Investments in Securities | ||||||||||||||||
Australia |
$ | | $ | 1,816,791 | $ | | $ | 1,816,791 | ||||||||
Brazil |
812,920 | 510,967 | | 1,323,887 | ||||||||||||
China |
797,017 | | | 797,017 | ||||||||||||
France |
| 848,315 | | 848,315 | ||||||||||||
Germany |
| 1,837,933 | | 1,837,933 | ||||||||||||
Hong Kong |
1,955,251 | | | 1,955,251 | ||||||||||||
Ireland |
| 1,250,893 | | 1,250,893 | ||||||||||||
Italy |
1,061,244 | 3,095,920 | | 4,157,164 | ||||||||||||
Japan |
9,672,010 | 1,478,093 | | 11,150,103 | ||||||||||||
Luxembourg |
| 1,368,089 | | 1,368,089 | ||||||||||||
Netherland |
| 2,746,452 | | 2,746,452 | ||||||||||||
Norway |
1,021,808 | | | 1,021,808 | ||||||||||||
Singapore |
| 851,694 | | 851,694 | ||||||||||||
South Africa |
618,651 | | | 618,651 | ||||||||||||
Sweden |
| 1,276,043 | | 1,276,043 | ||||||||||||
Switzerland |
953,462 | 3,590,766 | | 4,544,228 | ||||||||||||
Taiwan |
| 1,107,454 | | 1,107,454 | ||||||||||||
United Kingdom |
6,327,409 | 3,881,559 | | 10,208,968 | ||||||||||||
United States |
37,789,049 | | | 37,789,049 | ||||||||||||
Total Investments in Securities |
61,008,821 | 25,660,969 | | 86,669,790 | ||||||||||||
Other Investments Assets* |
||||||||||||||||
Forward Foreign Currency Contracts |
| 111,194 | | 111,194 | ||||||||||||
Other Investments Liabilities* |
||||||||||||||||
Forward Foreign Currency Contracts |
| (56,040 | ) | | (56,040 | ) | ||||||||||
Total Other Investments |
55,154 | 55,154 | ||||||||||||||
Total Investments |
$ | 61,008,821 | $ | 25,716,123 | $ | | $ | 86,724,944 |
* | Unrealized appreciation (depreciation). |
NOTE 4Derivative Investments
The Fund may enter into an International Swaps and Derivatives Association Master Agreement (ISDA Master Agreement) under which a fund may trade OTC derivatives. An OTC transaction entered into under an ISDA Master Agreement typically involves a collateral posting arrangement, payment netting provisions and close-out netting provisions. These netting provisions allow for reduction of credit risk through netting of contractual obligations. The enforceability of the netting provisions of the ISDA Master Agreement depends on the governing law of the ISDA Master Agreement, among other factors.
Invesco V.I. Global Core Equity Fund
For financial reporting purposes, the Fund does not offset OTC derivative assets or liabilities that are subject to ISDA Master Agreements in the Statement of Assets and Liabilities.
Value of Derivative Investments at Period-End
The table below summarizes the value of the Funds derivative investments, detailed by primary risk exposure, held as of December 31, 2017:
Value | ||||
Derivative Assets | Currency Risk |
|||
Unrealized appreciation on forward foreign currency contracts outstanding |
$ | 111,194 | ||
Derivatives not subject to master netting agreements |
| |||
Total Derivative Assets subject to master netting agreements |
$ | 111,194 |
Value | ||||
Derivative Liabilities | Currency Risk |
|||
Unrealized depreciation on forward foreign currency contracts outstanding |
$ | (56,040 | ) | |
Derivatives not subject to master netting agreements |
| |||
Total Derivative Liabilities subject to master netting agreements |
$ | (56,040 | ) |
Offsetting Assets and Liabilities
The table below reflects the Funds exposure to Counterparties subject to either an ISDA Master Agreement or other agreement for OTC derivative transactions as of December 31, 2017.
Financial Assets |
Financial Liabilities |
Collateral (Received)/Pledged | ||||||||||||||||||||||
Counterparty | Forward Foreign Currency Contracts |
Forward Foreign Currency |
Net Value of Derivatives |
Non-Cash | Cash | Net Amount |
||||||||||||||||||
Barclays Bank PLC |
$ | 10,499 | $ | (56,040 | ) | $ | (45,541 | ) | $ | | $ | | $ | (45,541 | ) | |||||||||
Goldman Sachs International |
50,498 | | 50,498 | | | 50,498 | ||||||||||||||||||
J.P, Morgan Chase Bank, N.A. |
50,197 | | 50,197 | | | 50,197 | ||||||||||||||||||
Total |
$ | 111,194 | $ | (56,040 | ) | $ | 55,154 | $ | | $ | | $ | 55,154 |
Effect of Derivative Investments for the year ended December 31, 2017
The table below summarizes the gains (losses) on derivative investments, detailed by primary risk exposure, recognized in earnings during the period:
Location of Gain (Loss) on Statement of Operations |
||||
Currency Risk |
||||
Realized Gain (Loss): |
||||
Forward foreign currency contracts |
$ | (45,882 | ) | |
Change in Net Unrealized Appreciation (Depreciation): |
||||
Forward foreign currency contracts |
(166,155 | ) | ||
Total |
$ | (212,037 | ) |
The table below summarizes the average notional value of forward foreign currency contracts outstanding during the period.
Forward Foreign Currency |
||||
Average notional value |
$ | 5,752,276 |
NOTE 5Security Transactions with Affiliated Funds
The Fund is permitted to purchase or sell securities from or to certain other Invesco Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Trust from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment adviser (or affiliated investment advisers), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, for the year ended December 31, 2017, the Fund engaged in securities purchases of $246,805.
Invesco V.I. Global Core Equity Fund
NOTE 6Trustees and Officers Fees and Benefits
Trustees and Officers Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees and Officers Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees were eligible to participate in a retirement plan that provided for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees and Officers Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 7Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period-end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 8Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended December 31, 2017 and 2016:
2017 | 2016 | |||||||
Ordinary income |
$ | 901,353 | $ | 726,846 |
Tax Components of Net Assets at Period-End:
2017 | ||||
Undistributed ordinary income |
$ | 789,427 | ||
Net unrealized appreciation investments |
15,947,443 | |||
Net unrealized appreciation foreign currencies |
3,327 | |||
Temporary book/tax differences |
(35,161 | ) | ||
Shares of beneficial interest |
70,054,194 | |||
Total net assets |
$ | 86,759,230 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Funds net unrealized appreciation difference is attributable primarily to wash sales, forward foreign currency contracts and passive foreign investment companies.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Funds temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund does not have a capital loss carryforward as of December 31, 2017.
NOTE 9Investment Transactions
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended December 31, 2017 was $55,553,014 and $57,426,469, respectively. Cost of investments, including any derivatives, on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investments on a Tax Basis | ||||
Aggregate unrealized appreciation of investments |
$ | 16,703,944 | ||
Aggregate unrealized (depreciation) of investments |
(756,501 | ) | ||
Net unrealized appreciation of investments |
$ | 15,947,443 |
Cost of investments for tax purposes is $70,777,501.
Invesco V.I. Global Core Equity Fund
NOTE 10Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of expired capital loss carryforward, on December 31, 2017, undistributed net investment income was increased by $26,567, undistributed net realized gain (loss) was increased by $2,587,287 and shares of beneficial interest was decreased by $2,613,854. This reclassification had no effect on the net assets of the Fund.
NOTE 11Share Information
Summary of Share Activity | ||||||||||||||||
Years ended December 31, | ||||||||||||||||
2017(a) | 2016 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: |
||||||||||||||||
Series I |
830,159 | $ | 8,058,908 | 392,398 | $ | 3,370,814 | ||||||||||
Series II |
6,745 | 66,624 | 24,893 | 212,975 | ||||||||||||
Issued as reinvestment of dividends: |
||||||||||||||||
Series I |
77,528 | 788,459 | 71,260 | 635,642 | ||||||||||||
Series II |
11,087 | 112,756 | 10,214 | 91,204 | ||||||||||||
Reacquired: |
||||||||||||||||
Series I |
(1,075,643 | ) | (10,456,375 | ) | (1,224,711 | ) | (10,331,318 | ) | ||||||||
Series II |
(195,837 | ) | (1,907,507 | ) | (232,258 | ) | (1,971,236 | ) | ||||||||
Net increase (decrease) in share activity |
(345,961 | ) | $ | (3,337,135 | ) | (958,204 | ) | $ | (7,991,919 | ) |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 85% of the outstanding shares of the Fund. The Fund and the Funds principal underwriter or adviser, are parties to participation agreements with these entities whereby these entities sell units of interest in separate accounts funding variable products that are invested in the Fund. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
NOTE 12Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Net asset value, beginning of period |
Net investment income(a) |
Net gains (losses) on securities (both realized and unrealized) |
Total from investment operations |
Dividends from net investment income |
Distributions from net realized gains |
Total distributions |
Net asset value, end of period |
Total return(b) |
Net assets, end of period (000s omitted) |
Ratio
of expenses to average net assets with fee waivers and/or expenses absorbed |
Ratio of expenses to average net assets without fee waivers and/or expenses absorbed |
Ratio of net investment income to average net assets |
Portfolio turnover(c) |
|||||||||||||||||||||||||||||||||||||||||||
Series I |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/17 |
$ | 8.83 | $ | 0.09 | $ | 1.93 | $ | 2.02 | $ | (0.12 | ) | $ | | $ | (0.12 | ) | $ | 10.73 | 22.90 | % | $ | 73,716 | 1.04 | %(d) | 1.04 | %(d) | 0.95 | %(d) | 69 | % | ||||||||||||||||||||||||||
Year ended 12/31/16 |
8.35 | 0.10 | 0.47 | 0.57 | (0.09 | ) | | (0.09 | ) | 8.83 | 6.81 | 62,130 | 1.05 | 1.05 | 1.14 | 47 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 |
8.94 | 0.09 | (0.23 | ) | (0.14 | ) | (0.13 | ) | (0.32 | ) | (0.45 | ) | 8.35 | (1.42 | ) | 65,167 | 1.06 | 1.06 | 0.98 | 75 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 |
9.06 | 0.12 | (0.05 | ) | 0.07 | (0.19 | ) | | (0.19 | ) | 8.94 | 0.69 | 73,816 | 1.06 | 1.06 | 1.26 | 123 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 |
7.54 | 0.15 | 1.54 | 1.69 | (0.17 | ) | | (0.17 | ) | 9.06 | 22.50 | 83,982 | 1.08 | 1.08 | 1.81 | 32 | ||||||||||||||||||||||||||||||||||||||||
Series II |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/17 |
8.83 | 0.07 | 1.92 | 1.99 | (0.09 | ) | | (0.09 | ) | 10.73 | 22.60 | 13,043 | 1.29 | (d) | 1.29 | (d) | 0.70 | (d) | 69 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/16 |
8.35 | 0.07 | 0.47 | 0.54 | (0.06 | ) | | (0.06 | ) | 8.83 | 6.50 | 12,302 | 1.30 | 1.30 | 0.89 | 47 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 |
8.93 | 0.07 | (0.23 | ) | (0.16 | ) | (0.10 | ) | (0.32 | ) | (0.42 | ) | 8.35 | (1.65 | ) | 13,286 | 1.31 | 1.31 | 0.73 | 75 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 |
9.04 | 0.10 | (0.05 | ) | 0.05 | (0.16 | ) | | (0.16 | ) | 8.93 | 0.48 | 16,010 | 1.31 | 1.31 | 1.01 | 123 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 |
7.52 | 0.13 | 1.53 | 1.66 | (0.14 | ) | | (0.14 | ) | 9.04 | 22.25 | 21,279 | 1.33 | 1.33 | 1.56 | 32 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year, if applicable, and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns. |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. |
(d) | Ratios are based on average daily net assets (000s omitted) of $67,941 and $12,675 for Series I and Series II shares, respectively. |
Invesco V.I. Global Core Equity Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) and Shareholders of Invesco V.I. Global Core Equity Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Invesco V.I. Global Core Equity Fund (one of the funds constituting AIM Variable Insurance Funds (Invesco Variable Insurance Funds), hereafter referred to as the Fund) as of December 31, 2017, the related statement of operations for the year ended December 31, 2017, the statement of changes in net assets for each of the two years in the period ended December 31, 2017, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2017 (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2017 and the financial highlights for each of the five years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Funds management. Our responsibility is to express an opinion on the Funds financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2017 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, TX
February 14, 2018
We have served as the auditor of one or more of the investment companies in the Invesco/PowerShares group of investment companies since at least 1995. We have not determined the specific year we began serving as auditor.
Invesco V.I. Global Core Equity Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period July 1, 2017 through December 31, 2017.
The actual and hypothetical expenses in the examples below do not represent the effect of any fees or other expenses assessed in connection with a variable product; if they did, the expenses shown would be higher while the ending account values shown would be lower.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled Actual Expenses Paid During Period to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Funds actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs. Therefore, the hypothetical information is useful in comparing ongoing costs, and will not help you determine the relative total costs of owning different funds.
Class | Beginning Account Value (07/01/17) |
Actual | HYPOTHETICAL (5% annual return before expenses) |
Annualized Expense Ratio |
||||||||||||||||||||
Ending Account Value (12/31/17)1 |
Expenses Paid During Period2 |
Ending Account Value (12/31/17) |
Expenses Paid During Period2 |
|||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 1,106.20 | $ | 5.47 | $ | 1,020.01 | $ | 5.24 | 1.03 | % | ||||||||||||
Series II | 1,000.00 | 1,105.80 | 6.79 | 1,018.75 | 6.51 | 1.28 |
1 | The actual ending account value is based on the actual total return of the Fund for the period July 1, 2017 through December 31, 2017, after actual expenses and will differ from the hypothetical ending account value which is based on the Funds expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Funds annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half year. |
Invesco V.I. Global Core Equity Fund
Tax Information
Form 1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific states requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended December 31, 2017:
Federal and State Income Tax |
||||||||
Corporate Dividends Received Deduction* |
60.99 | % | ||||||
U.S. Treasury Obligations* |
0.00 | % |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Funds fiscal year. |
Invesco V.I. Global Core Equity Fund
Trustees and Officers
The address of each trustee and officer is AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Trust), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trusts organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 1960 Trustee |
2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business
Formerly: Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US), Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) |
158 | None | ||||
Philip A. Taylor2 1954 Trustee and Senior Vice President |
2006 | Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco Aim Management Group, Inc.) (financial services holding company); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.) (registered transfer agent); Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company); Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management).
Formerly: Co-Chairman, Co-President and Co-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chief Executive Officer and President, Van Kampen Exchange Corp; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurers Series Trust (Invesco Treasurers Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurers Series Trust (Invesco Treasurers Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) (registered broker dealer); Manager, Invesco PowerShares Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco Aim Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurers Series Trust (Invesco Treasurers Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. |
158 | None |
1 | Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser. |
2 | Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser. |
Invesco V.I. Global Core Equity Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Independent Trustees | ||||||||
Bruce L. Crockett 1944 Trustee and Chair |
1993 | Chairman, Crockett Technologies Associates (technology consulting company)
Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute: Member of the Audit Committee, Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council |
158 | Director and Chairman of the Audit Committee, ALPS (Attorneys Liability Protection Society) (insurance company); Director and Member of the Audit Committee and Compensation Committee, Ferroglobe PLC (metallurgical company) | ||||
David C. Arch 1945 Trustee |
2010 | Chairman of Blistex Inc. (consumer health care products manufacturer); Member, World Presidents Organization | 158 | Board member of the Illinois Manufacturers Association | ||||
Jack M. Fields 1952 Trustee |
1997 | Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Chairman, Discovery Learning Alliance (non-profit)
Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff) (human resources provider); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives |
158 | None | ||||
Cynthia Hostetler 1962 Trustee |
2017 | Non-Executive Director and Trustee of a number of public and private business corporations
Formerly: Head of Investment Funds and Private Equity, Overseas Private Investment Corporation; President, First Manhattan Bancorporation, Inc.; Attorney, Simpson Thacher & Bartlett LLP |
158 | Vulcan Materials Company (construction materials company); Trilinc Global Impact Fund; Aberdeen Investment Funds (4 portfolios); Artio Global Investment LLC (mutual fund complex); Edgen Group, Inc. (specialized energy and infrastructure products distributor) | ||||
Eli Jones 1961 Trustee |
2016 | Professor and Dean, Mays Business School Texas A&M University
Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University; Director, Arvest Bank |
158 | Insperity, Inc. (formerly known as Administaff) (human resources provider) | ||||
Prema Mathai-Davis 1950 Trustee |
1998 | Retired. | 158 | None | ||||
Teresa M. Ressel 1962 Trustee |
2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Chief Financial Officer, Olayan America, The Olayan Group (international investor/commercial/industrial); Chief Executive Officer, UBS Securities LLC; Group Chief Operating Officer, Americas, UBS AG; Assistant Secretary for Management & Budget and CFO, US Department of the Treasury |
158 | Atlantic Power Corporation (power generation company); ON Semiconductor Corp. (semiconductor supplier) | ||||
Ann Barnett Stern 1957 Trustee |
2017 | President and Chief Executive Officer, Houston Endowment Inc. (private philanthropic institution)
Formerly: Executive Vice President and General Counsel, Texas Childrens Hospital; Attorney, Beck, Redden and Secrest, LLP; Business Law Instructor, University of St. Thomas; Attorney, Andrews & Kurth LLP |
158 | Federal Reserve Bank of Dallas | ||||
Raymond Stickel, Jr. 1944 Trustee |
2005 | Retired.
Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios); Partner, Deloitte & Touche |
158 | None | ||||
Robert C. Troccoli 1949 Trustee |
2016 | Adjunct Professor, University of Denver Daniels College of Business
Formerly: Senior Partner, KPMG LLP |
158 | None | ||||
Christopher L. Wilson 1957 Trustee |
2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Managing Partner, CT2, LLC (investing and consulting firm); President/Chief Executive Officer, Columbia Funds, Bank of America Corporation; President/Chief Executive Officer, CDC IXIS Asset Management Services, Inc.; Principal & Director of Operations, Scudder Funds, Scudder, Stevens & Clark, Inc.; Assistant Vice President, Fidelity Investments |
158 | TD Asset Management USA Inc. (mutual fund complex) (22 portfolios); ISO New England, Inc. (non-profit organization managing regional electricity market) |
Invesco V.I. Global Core Equity Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers | ||||||||
Sheri Morris 1964 President, Principal Executive Officer and Treasurer |
1999 | President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco Aim Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; and Treasurer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust and PowerShares Actively Managed Exchange-Traded Fund Trust |
N/A | N/A | ||||
Russell C. Burk 1958 Senior Vice President and Senior Officer |
2005 | Senior Vice President and Senior Officer, The Invesco Funds | N/A | N/A | ||||
John M. Zerr 1962 Senior Vice President, Chief Legal Officer and Secretary |
2006 | Director, Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Managing Director, Invesco PowerShares Capital Management LLC; Director, Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust; Manager and Secretary, Invesco Indexing LLC
Formerly: Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser); Vice President and Secretary, PBHG Funds (an investment company) and PBHG Insurance Series Fund (an investment company); Chief Operating Officer, General Counsel and Secretary, Old Mutual Investment Partners (a broker-dealer); General Counsel and Secretary, Old Mutual Fund Services (an administrator) and Old Mutual Shareholder Services (a shareholder servicing center); Executive Vice President, General Counsel and Secretary, Old Mutual Capital, Inc. (an investment adviser); and Vice President and Secretary, Old Mutual Advisors Funds (an investment company) |
N/A | N/A | ||||
Gregory G. McGreevey 1962 Senior Vice President |
2012 | Senior Managing Director, Invesco Ltd.; Director, Chairman, President, and Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President, Invesco Management Group, Inc.; Director, Invesco Mortgage Capital, Inc. and Invesco Senior Secured Management, Inc.; and Senior Vice President, The Invesco Funds
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A | ||||
Kelli Gallegos 1970 Vice President, Principal Financial Officer and Assistant Treasurer |
2008 | Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A |
Invesco V.I. Global Core Equity Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers(continued) | ||||||||
Tracy Sullivan 1962 Vice President, Chief Tax Officer and Assistant Treasurer |
2008 | Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A | ||||
Crissie M. Wisdom 1969 Anti-Money Laundering Compliance Officer |
2013 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., Invesco Management Group, Inc., The Invesco Funds, and PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp. |
N/A | N/A | ||||
Robert R. Leveille 1969 Chief Compliance Officer |
2016 | Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds
Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds |
N/A | N/A |
The Statement of Additional Information of the Trust includes additional information about the Funds Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Funds Statement of Additional Information for information on the Funds sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 |
Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Auditors PricewaterhouseCoopers LLP 1000 Louisiana Street, Suite 5800 Houston, TX 77002-5678 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2005 Market Street, Suite 2600 Philadelphia, PA 19103-7018 |
Counsel to the Independent Trustees Goodwin Procter LLP 901 New York Avenue, N.W. Washington, D.C. 20001 |
Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
Invesco V.I. Global Core Equity Fund
| ||||
Annual Report to Shareholders
|
December 31, 2017 | |||
| ||||
Invesco V.I. Global Health Care Fund
|
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Funds semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The Funds Form N-Q filings are available on the SEC website, sec.gov. Copies of the Funds Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-07452 and 033-57340. The Funds most recent portfolio holdings, as filed on Form N-Q, have also been made available to insurance companies issuing variable annuity contracts and variable life insurance policies (variable products) that invest in the Fund. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/ proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
This report must be accompanied or preceded by a currently effective Fund prospectus and variable product prospectus, which contain more complete information, including sales charges and expenses. Investors should read each carefully before investing.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
Invesco Distributors, Inc. I-VIGHC-AR-1 02122018 1554 |
Managements Discussion of Fund Performance
Invesco V.I. Global Health Care Fund
Invesco V.I. Global Health Care Fund
Your Funds Long-Term Performance
Results of a $10,000 Investment Oldest Share Class(es)
Fund and index data from 12/31/07
1 | Source: Lipper Inc. |
2 | Source: FactSet Research Systems Inc. |
Invesco V.I. Global Health Care Fund
Invesco V.I. Global Health Care Funds investment objective is long-term growth of capital.
∎ | Unless otherwise stated, information presented in this report is as of December 31, 2017, and is based on total net assets. |
∎ | Unless otherwise noted, all data provided by Invesco. |
Invesco V.I. Global Health Care Fund
Invesco V.I. Global Health Care Fund
Schedule of Investments(a)
December 31, 2017
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Global Health Care Fund
Investment Abbreviations:
ADR | American Depositary Receipt |
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poors. |
(b) | Non-income producing security. |
(c) | The money market fund and the Fund are affiliated by having the same investment adviser. The rate shown is the 7-day SEC standardized yield as of December 31, 2017. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Global Health Care Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Global Health Care Fund
Statement of Changes in Net Assets
For the years ended December 31, 2017 and 2016
2017 | 2016 | |||||||
Operations: |
||||||||
Net investment income (loss) |
$ | (332,593 | ) | $ | 586,472 | |||
Net realized gain |
25,713,301 | 11,179,577 | ||||||
Change in net unrealized appreciation (depreciation) |
6,965,617 | (46,634,315 | ) | |||||
Net increase (decrease) in net assets resulting from operations |
32,346,325 | (34,868,266 | ) | |||||
Distributions to shareholders from net investment income: |
||||||||
Series I |
(542,045 | ) | | |||||
Series ll |
(59,680 | ) | | |||||
Total distributions from net investment income |
(601,725 | ) | | |||||
Distributions to shareholders from net realized gains: |
||||||||
Series l |
(7,529,290 | ) | (24,359,518 | ) | ||||
Series ll |
(3,703,036 | ) | (12,160,811 | ) | ||||
Total distributions from net realized gains |
(11,232,326 | ) | (36,520,329 | ) | ||||
Share transactionsnet: |
||||||||
Series l |
(15,342,320 | ) | (16,391,139 | ) | ||||
Series ll |
(8,488,857 | ) | (10,597,292 | ) | ||||
Net increase (decrease) in net assets resulting from share transactions |
(23,831,177 | ) | (26,988,431 | ) | ||||
Net increase (decrease) in net assets |
(3,318,903 | ) | (98,377,026 | ) | ||||
Net assets: |
||||||||
Beginning of year |
214,597,733 | 312,974,759 | ||||||
End of year (includes undistributed net investment income (loss) of $(75,640) and $519,244, respectively) |
$ | 211,278,830 | $ | 214,597,733 |
Notes to Financial Statements
December 31, 2017
NOTE 1Significant Accounting Policies
Invesco V.I. Global Health Care Fund (the Fund) is a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Trust). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end series management investment company consisting of twenty-four separate portfolios, (each constituting a Fund). The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each Fund or class will be voted on exclusively by the shareholders of such Fund or class. Current Securities and Exchange Commission (SEC) guidance, however, requires participating insurance companies offering separate accounts to vote shares proportionally in accordance with the instructions of the contract owners whose investments are funded by shares of each Fund or class.
The Funds investment objective is long-term growth of capital.
The Fund currently offers two classes of shares, Series I and Series II, both of which are offered to insurance company separate accounts funding variable annuity contracts and variable life insurance policies (variable products).
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946, Financial Services Investment Companies.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations Securities, including restricted securities, are valued according to the following policy. |
A security listed or traded on an exchange (except convertible securities) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and asked prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and asked prices. For purposes of determining net asset value (NAV) per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (NYSE).
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end-of-day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
Invesco V.I. Global Health Care Fund
Debt obligations (including convertible securities) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual trading characteristics and other market data. Pricing services generally value debt obligations assuming orderly transactions of institutional round lot size, but a fund may hold or transact in the same securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Foreign securities (including foreign exchange contracts) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that the investment adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trusts officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/asked quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a securitys fair value.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuers assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
B. | Securities Transactions and Investment Income Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any) is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Funds net asset value and, accordingly, they reduce the Funds total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and the Statement of Changes in Net Assets, or the net investment income per share and the ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. | Country Determination For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuers securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
D. | Distributions Distributions from net investment income and net realized capital gain, if any, are generally declared and paid to separate accounts of participating insurance companies annually and recorded on the ex-dividend date. |
E. | Federal Income Taxes The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the Internal Revenue Code), necessary to qualify as a regulated investment company and to distribute substantially all of the Funds taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. |
Invesco V.I. Global Health Care Fund
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Funds uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
F. | Expenses Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
G. | Accounting Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
H. | Indemnifications Under the Trusts organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Funds servicing agreements, that contain a variety of indemnification clauses. The Funds maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
I. | Foreign Currency Translations Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Funds books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. |
The Fund may invest in foreign securities, which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests and are shown in the Statement of Operations.
J. | Forward Foreign Currency Contracts The Fund may engage in foreign currency transactions either on a spot (i.e. for prompt delivery and settlement) basis, or through forward foreign currency contracts, to manage or minimize currency or exchange rate risk. |
The Fund may also enter into forward foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to lock in the U.S. dollar price of that security, or the Fund may also enter into forward foreign currency contracts that do not provide for physical settlement of the two currencies, but instead are settled by a single cash payment calculated as the difference between the agreed upon exchange rate and the spot rate at settlement based upon an agreed upon notional amount (non-deliverable forwards). The Fund will set aside liquid assets in an amount equal to the daily mark-to-market obligation for forward foreign currency contracts.
A forward foreign currency contract is an obligation between two parties (Counterparties) to purchase or sell a specific currency for an agreed-upon price at a future date. The use of forward foreign currency contracts does not eliminate fluctuations in the price of the underlying securities the Fund owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statement of Operations. The primary risks associated with forward foreign currency contracts include failure of the Counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities.
K. | Other Risks The Funds performance is vulnerable to factors affecting the health care industry, including government regulation, obsolescence caused by scientific advances and technological innovations. |
Invesco V.I. Global Health Care Fund
NOTE 2Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the Adviser or Invesco). Under the terms of the investment advisory agreement, the Fund accrues daily and pays monthly an advisory fee to the Adviser based on the annual rate of the Funds average daily net assets as follows:
Average Daily Net Assets | Rate | |||
First $250 million |
0.75% | |||
Next $250 million |
0.74% | |||
Next $500 million |
0.73% | |||
Next $1.5 billion |
0.72% | |||
Next $2.5 billion |
0.71% | |||
Next $2.5 billion |
0.70% | |||
Next $2.5 billion |
0.69% | |||
Over $10 billion |
0.68% |
For the year ended December 31, 2017, the effective advisory fees incurred by the Fund was 0.75%.
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. and separate sub-advisory agreements with Invesco PowerShares Capital Management LLC and Invesco Asset Management (India) Private Limited (collectively, the Affiliated Sub-Advisers) the Adviser, not the Fund, will pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2018, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Series I shares to 2.00% and Series II shares to 2.25% of average daily net assets (the expense limits). In determining the Advisers obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on June 30, 2018. During its term, the fee waiver agreement cannot be terminated or amended to increase the expense limits or reduce the advisory fee waiver without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
Further, the Adviser has contractually agreed, through at least June 30, 2019, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the year ended December 31, 2017, the Adviser waived advisory fees of $4,890.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco a fee for costs incurred in providing accounting services and fund administrative services to the Fund and to reimburse Invesco for fees paid to insurance companies that have agreed to provide certain administrative services to the Fund. These administrative services provided by the insurance companies may include, among other things: maintenance of master accounts with the Fund; tracking, recording and transmitting net purchase and redemption orders for Fund shares; maintaining and preserving records related to the purchase, redemption and other account activity of variable product owners; distributing copies of Fund documents such as prospectuses, proxy materials and periodic reports, to variable product owners, and responding to inquiries from variable product owners about the Fund. Pursuant to such agreement, for the year ended December 31, 2017, Invesco was paid $55,741 for accounting and fund administrative services and was reimbursed $330,535 for fees paid to insurance companies.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (IIS) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. For the year ended December 31, 2017, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
The Trust has entered into a master distribution agreement with Invesco Distributors, Inc. (IDI) to serve as the distributor for the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Funds Series II shares (the Plan). The Fund, pursuant to the Plan, pays IDI compensation at the annual rate of 0.25% of the Funds average daily net assets of Series II shares. The fees are accrued daily and paid monthly. Of the Plan payments, up to 0.25% of the average daily net assets of the Series II shares may be paid to insurance companies who furnish continuing personal shareholder services to customers who purchase and own Series II shares of the Fund. For the year ended December 31, 2017, expenses incurred under the Plan are detailed in the Statement of Operations as Distribution fees.
For the year ended December 31, 2017, the Fund incurred $1,875 in brokerage commissions with Invesco Capital Markets, Inc., an affiliate of the Adviser and IDI, for portfolio transactions executed on behalf of the Fund.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
Invesco V.I. Global Health Care Fund
NOTE 3Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investments assigned level:
Level 1 | Prices are determined using quoted prices in an active market for identical assets. |
Level 2 | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Level 3 | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Funds own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of December 31, 2017. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
The Funds policy is to recognize transfers in and out of the valuation levels as of the end of the reporting period. During the year ended December 31, 2017, there were transfers from Level 1 to Level 2 of $9,134,765 and from Level 2 to Level 1 of $3,326,978, due to foreign fair value adjustments.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Investment in Securities | ||||||||||||||||
Common Stocks & Other Equity Interests |
$ | 185,149,539 | $ | 15,494,930 | $ | | $ | 200,644,469 | ||||||||
Money Market Funds |
10,609,471 | | | 10,609,471 | ||||||||||||
Total Investments |
$ | 195,759,010 | $ | 15,494,930 | $ | | $ | 211,253,940 |
NOTE 4Security Transactions with Affiliated Funds
The Fund is permitted to purchase or sell securities from or to certain other Invesco Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment adviser (or affiliated investment advisers), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, for the year ended December 31, 2017, the Fund engaged in securities sales of $1,995,358, which resulted in net realized gains of $489,260.
NOTE 5Trustees and Officers Fees and Benefits
Trustees and Officers Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees and Officers Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees were eligible to participate in a retirement plan that provided for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees and Officers Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 6Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period-end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
Invesco V.I. Global Health Care Fund
NOTE 7Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended December 31, 2017 and 2016:
2017 | 2016 | |||||||
Ordinary income |
$ | 601,725 | $ | 5,118,845 | ||||
Long-term capital gain |
11,232,326 | 31,401,484 | ||||||
Total distributions |
$ | 11,834,051 | $ | 36,520,329 |
Tax Components of Net Assets at Period-End:
2017 | ||||
Undistributed ordinary income |
$ | 280,029 | ||
Undistributed long-term gain |
25,062,197 | |||
Net unrealized appreciation investments |
27,239,966 | |||
Net unrealized appreciation (depreciation) foreign currencies |
(3,952 | ) | ||
Temporary book/tax differences |
(75,640 | ) | ||
Shares of beneficial interest |
158,776,230 | |||
Total net assets |
$ | 211,278,830 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Funds net unrealized appreciation difference is attributable primarily to wash sales.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Funds temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund does not have a capital loss carryforward as of December 31, 2017.
NOTE 8Investment Transactions
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended December 31, 2017 was $79,103,870 and $119,328,478, respectively. Cost of investments, including any derivatives, on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investments on a Tax Basis | ||||
Aggregate unrealized appreciation of investments |
$ | 38,418,131 | ||
Aggregate unrealized (depreciation) of investments |
(11,178,165 | ) | ||
Net unrealized appreciation of investments |
$ | 27,239,966 |
Cost of investments for tax purposes is $184,013,974.
NOTE 9Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of net operating loss and foreign currency transactions, on December 31, 2017, undistributed net investment income (loss) was increased by $339,434 and undistributed net realized gain was decreased by $339,434. This reclassification had no effect on the net assets of the Fund.
Invesco V.I. Global Health Care Fund
NOTE 10Share Information
Summary of Share Activity | ||||||||||||||||
Years ended December 31, | ||||||||||||||||
2017(a) | 2016 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: |
||||||||||||||||
Series I |
570,966 | $ | 15,191,152 | 712,448 | $ | 19,800,449 | ||||||||||
Series II |
122,136 | 3,109,327 | 173,821 | 4,619,231 | ||||||||||||
Issued as reinvestment of dividends: |
||||||||||||||||
Series I |
300,385 | 8,071,335 | 924,811 | 24,359,518 | ||||||||||||
Series II |
146,580 | 3,762,716 | 482,189 | 12,160,811 | ||||||||||||
Reacquired: |
||||||||||||||||
Series I |
(1,453,869 | ) | (38,604,807 | ) | (2,206,286 | ) | (60,551,106 | ) | ||||||||
Series II |
(604,171 | ) | (15,360,900 | ) | (1,033,250 | ) | (27,377,334 | ) | ||||||||
Net increase (decrease) in share activity |
(917,973 | ) | $ | (23,831,177 | ) | (946,267 | ) | $ | (26,988,431 | ) |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 54% of the outstanding shares of the Fund. The Fund and the Funds principal underwriter or adviser, are parties to participation agreements with these entities whereby these entities sell units of interest in separate accounts funding variable products that are invested in the Fund. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
NOTE 11Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Net asset value, beginning of period |
Net investment income (loss)(a) |
Net gains (losses) on securities (both realized and unrealized) |
Total from investment operations |
Dividends from net investment income |
Distributions from net realized gains |
Total distributions |
Net asset value, end of period |
Total return(b) |
Net assets, end of period (000s omitted) |
Ratio
of expenses to average net assets with fee waivers and/or expenses absorbed |
Ratio of expenses to average net assets without fee waivers and/or expenses absorbed |
Ratio of net investment income (loss) to average net assets |
Portfolio turnover(c) |
|||||||||||||||||||||||||||||||||||||||||||
Series I |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/17 |
$ | 24.11 | $ | (0.02 | ) | $ | 3.86 | $ | 3.84 | $ | (0.10 | ) | $ | (1.41 | ) | $ | (1.51 | ) | $ | 26.44 | 15.83 | % | $ | 144,038 | 1.01 | %(d) | 1.01 | %(d) | (0.08 | )%(d) | 37 | % | ||||||||||||||||||||||||
Year ended 12/31/16 |
31.75 | 0.09 | (3.36 | ) | (3.27 | ) | | (4.37 | ) | (4.37 | ) | 24.11 | (11.46 | ) | 145,408 | 1.04 | 1.04 | 0.31 | 23 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 |
33.78 | 0.00 | 1.08 | 1.08 | | (3.11 | ) | (3.11 | ) | 31.75 | 3.16 | 209,511 | 1.06 | 1.07 | 0.01 | 42 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 |
29.32 | (0.00 | ) | 5.71 | 5.71 | | (1.25 | ) | (1.25 | ) | 33.78 | 19.67 | 220,561 | 1.08 | 1.09 | (0.01 | ) | 29 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 |
21.00 | 0.01 | 8.49 | 8.50 | (0.18 | ) | | (0.18 | ) | 29.32 | 40.54 | 180,535 | 1.09 | 1.10 | 0.03 | 32 | ||||||||||||||||||||||||||||||||||||||||
Series II |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/17 |
23.07 | (0.08 | ) | 3.69 | 3.61 | (0.02 | ) | (1.41 | ) | (1.43 | ) | 25.25 | 15.55 | 67,240 | 1.26 | (d) | 1.26 | (d) | (0.33 | )(d) | 37 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/16 |
30.65 | 0.02 | (3.23 | ) | (3.21 | ) | | (4.37 | ) | (4.37 | ) | 23.07 | (11.69 | ) | 69,190 | 1.29 | 1.29 | 0.06 | 23 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 |
32.80 | (0.08 | ) | 1.04 | 0.96 | | (3.11 | ) | (3.11 | ) | 30.65 | 2.89 | 103,464 | 1.31 | 1.32 | (0.24 | ) | 42 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 |
28.57 | (0.08 | ) | 5.56 | 5.48 | | (1.25 | ) | (1.25 | ) | 32.80 | 19.38 | 78,070 | 1.33 | 1.34 | (0.26 | ) | 29 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 |
20.49 | (0.05 | ) | 8.27 | 8.22 | (0.14 | ) | | (0.14 | ) | 28.57 | 40.16 | 58,488 | 1.34 | 1.35 | (0.22 | ) | 32 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year, if applicable, and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns. |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. |
(d) | Ratios are based on average daily net assets (000s omitted) of $149,896, $70,720 Series I and Series II shares, respectively. |
Invesco V.I. Global Health Care Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) and Shareholders of Invesco V.I. Global Health Care Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Invesco V.I. Global Health Care Fund (one of the funds constituting AIM Variable Insurance Funds (Invesco Variable Insurance Funds), hereafter referred to as the Fund) as of December 31, 2017, the related statement of operations for the year ended December 31, 2017, the statement of changes in net assets for each of the two years in the period ended December 31, 2017, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2017 (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2017 and the financial highlights for each of the five years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Funds management. Our responsibility is to express an opinion on the Funds financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2017 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, TX
February 14, 2018
We have served as the auditor of one or more of the investment companies in the Invesco/PowerShares group of investment companies since at least 1995. We have not determined the specific year we began serving as auditor.
Invesco V.I. Global Health Care Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period July 1, 2017 through December 31, 2017.
The actual and hypothetical expenses in the examples below do not represent the effect of any fees or other expenses assessed in connection with a variable product; if they did, the expenses shown would be higher while the ending account values shown would be lower.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled Actual Expenses Paid During Period to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Funds actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs. Therefore, the hypothetical information is useful in comparing ongoing costs, and will not help you determine the relative total costs of owning different funds.
Class | Beginning Account Value (07/01/17) |
ACTUAL | HYPOTHETICAL (5% annual return before expenses) |
|||||||||||||||||||||
Ending Account Value (12/31/17)1 |
Expenses Paid During Period2 |
Ending Account Value (12/31/17) |
Expenses Paid During Period2 |
Annualized Expense Ratio |
||||||||||||||||||||
Series I |
$ | 1,000.00 | $ | 1,012.20 | $ | 5.07 | $ | 1,020.16 | $ | 5.09 | 1.00 | % | ||||||||||||
Series II |
1,000.00 | 1,010.90 | 6.34 | 1,018.90 | 6.36 | 1.25 |
1 | The actual ending account value is based on the actual total return of the Fund for the period July 1, 2017 through December 31, 2017, after actual expenses and will differ from the hypothetical ending account value which is based on the Funds expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Funds annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half year. |
Invesco V.I. Global Health Care Fund
Tax Information
Form 1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific states requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended December 31, 2017:
Federal and State Income Tax |
||||
Long-Term Capital Gain Distributions |
$ | 11,232,326 | ||
Corporate Dividends Received Deduction* |
100 | % | ||
U.S. Treasury Obligations* |
0.00 | % |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Funds fiscal year. |
Invesco V.I. Global Health Care Fund
Trustees and Officers
The address of each trustee and officer is AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Trust), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trusts organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 1960 Trustee |
2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business
Formerly: Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US), Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) |
158 | None | ||||
Philip A. Taylor2 1954 Trustee and Senior Vice President |
2006 | Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco Aim Management Group, Inc.) (financial services holding company); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.) (registered transfer agent); Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company); Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management).
Formerly: Co-Chairman, Co-President and Co-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chief Executive Officer and President, Van Kampen Exchange Corp; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurers Series Trust (Invesco Treasurers Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurers Series Trust (Invesco Treasurers Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) (registered broker dealer); Manager, Invesco PowerShares Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco Aim Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurers Series Trust (Invesco Treasurers Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. |
158 | None |
1 | Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser. |
2 | Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser. |
Invesco V.I. Global Health Care Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Independent Trustees | ||||||||
Bruce L. Crockett 1944 Trustee and Chair |
1993 | Chairman, Crockett Technologies Associates (technology consulting company)
Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute: Member of the Audit Committee, Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council |
158 | Director and Chairman of the Audit Committee, ALPS (Attorneys Liability Protection Society) (insurance company); Director and Member of the Audit Committee and Compensation Committee, Ferroglobe PLC (metallurgical company) | ||||
David C. Arch 1945 Trustee |
2010 | Chairman of Blistex Inc. (consumer health care products manufacturer); Member, World Presidents Organization | 158 | Board member of the Illinois Manufacturers Association | ||||
Jack M. Fields 1952 Trustee |
1997 | Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Chairman, Discovery Learning Alliance (non-profit)
Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff) (human resources provider); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives |
158 | None | ||||
Cynthia Hostetler 1962 Trustee |
2017 | Non-Executive Director and Trustee of a number of public and private business corporations
Formerly: Head of Investment Funds and Private Equity, Overseas Private Investment Corporation; President, First Manhattan Bancorporation, Inc.; Attorney, Simpson Thacher & Bartlett LLP |
158 | Vulcan Materials Company (construction materials company); Trilinc Global Impact Fund; Aberdeen Investment Funds (4 portfolios); Artio Global Investment LLC (mutual fund complex); Edgen Group, Inc. (specialized energy and infrastructure products distributor) | ||||
Eli Jones 1961 Trustee |
2016 | Professor and Dean, Mays Business School Texas A&M University
Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University; Director, Arvest Bank |
158 | Insperity, Inc. (formerly known as Administaff) (human resources provider) | ||||
Prema Mathai-Davis 1950 Trustee |
1998 | Retired. | 158 | None | ||||
Teresa M. Ressel 1962 Trustee |
2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Chief Financial Officer, Olayan America, The Olayan Group (international investor/commercial/industrial); Chief Executive Officer, UBS Securities LLC; Group Chief Operating Officer, Americas, UBS AG; Assistant Secretary for Management & Budget and CFO, US Department of the Treasury |
158 | Atlantic Power Corporation (power generation company); ON Semiconductor Corp. (semiconductor supplier) | ||||
Ann Barnett Stern 1957 Trustee |
2017 | President and Chief Executive Officer, Houston Endowment Inc. (private philanthropic institution)
Formerly: Executive Vice President and General Counsel, Texas Childrens Hospital; Attorney, Beck, Redden and Secrest, LLP; Business Law Instructor, University of St. Thomas; Attorney, Andrews & Kurth LLP |
158 | Federal Reserve Bank of Dallas | ||||
Raymond Stickel, Jr. 1944 Trustee |
2005 | Retired.
Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios); Partner, Deloitte & Touche |
158 | None | ||||
Robert C. Troccoli 1949 Trustee |
2016 | Adjunct Professor, University of Denver Daniels College of Business
Formerly: Senior Partner, KPMG LLP |
158 | None | ||||
Christopher L. Wilson 1957 Trustee |
2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Managing Partner, CT2, LLC (investing and consulting firm); President/Chief Executive Officer, Columbia Funds, Bank of America Corporation; President/Chief Executive Officer, CDC IXIS Asset Management Services, Inc.; Principal & Director of Operations, Scudder Funds, Scudder, Stevens & Clark, Inc.; Assistant Vice President, Fidelity Investments |
158 | TD Asset Management USA Inc. (mutual fund complex) (22 portfolios); ISO New England, Inc. (non-profit organization managing regional electricity market) |
Invesco V.I. Global Health Care Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers | ||||||||
Sheri Morris 1964 President, Principal Executive Officer and Treasurer |
1999 | President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco Aim Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; and Treasurer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust and PowerShares Actively Managed Exchange-Traded Fund Trust |
N/A | N/A | ||||
Russell C. Burk 1958 Senior Vice President and Senior Officer |
2005 | Senior Vice President and Senior Officer, The Invesco Funds | N/A | N/A | ||||
John M. Zerr 1962 Senior Vice President, Chief Legal Officer and Secretary |
2006 | Director, Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Managing Director, Invesco PowerShares Capital Management LLC; Director, Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust; Manager and Secretary, Invesco Indexing LLC
Formerly: Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser); Vice President and Secretary, PBHG Funds (an investment company) and PBHG Insurance Series Fund (an investment company); Chief Operating Officer, General Counsel and Secretary, Old Mutual Investment Partners (a broker-dealer); General Counsel and Secretary, Old Mutual Fund Services (an administrator) and Old Mutual Shareholder Services (a shareholder servicing center); Executive Vice President, General Counsel and Secretary, Old Mutual Capital, Inc. (an investment adviser); and Vice President and Secretary, Old Mutual Advisors Funds (an investment company) |
N/A | N/A | ||||
Gregory G. McGreevey 1962 Senior Vice President |
2012 | Senior Managing Director, Invesco Ltd.; Director, Chairman, President, and Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President, Invesco Management Group, Inc.; Director, Invesco Mortgage Capital, Inc. and Invesco Senior Secured Management, Inc.; and Senior Vice President, The Invesco Funds
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A | ||||
Kelli Gallegos 1970 Vice President, Principal Financial Officer and Assistant Treasurer |
2008 | Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A |
Invesco V.I. Global Health Care Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers(continued) | ||||||||
Tracy Sullivan 1962 Vice President, Chief Tax Officer and Assistant Treasurer |
2008 | Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A | ||||
Crissie M. Wisdom 1969 Anti-Money Laundering Compliance Officer |
2013 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., Invesco Management Group, Inc., The Invesco Funds, and PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp. |
N/A | N/A | ||||
Robert R. Leveille 1969 Chief Compliance Officer |
2016 | Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds
Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds |
N/A | N/A |
The Statement of Additional Information of the Trust includes additional information about the Funds Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Funds Statement of Additional Information for information on the Funds sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 |
Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Auditors PricewaterhouseCoopers LLP 1000 Louisiana Street, Suite 5800 Houston, TX 77002-5678 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2005 Market Street, Suite 2600 Philadelphia, PA 19103-7018 |
Counsel to the Independent Trustees Goodwin Procter LLP 901 New York Avenue, N.W. Washington, D.C. 20001 |
Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
Invesco V.I. Global Health Care Fund
| ||||
Annual Report to Shareholders
|
December 31, 2017 | |||
| ||||
Invesco V.I. Global Real Estate Fund
|
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Funds semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The Funds Form N-Q filings are available on the SEC website, sec.gov. Copies of the Funds Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-07452 and 033-57340. The Funds most recent portfolio holdings, as filed on Form N-Q, have also been made available to insurance companies issuing variable annuity contracts and variable life insurance policies (variable products) that invest in the Fund. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/ proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
This report must be accompanied or preceded by a currently effective Fund prospectus and variable product prospectus, which contain more complete information, including sales charges and expenses. Investors should read each carefully before investing.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE | ||
Invesco Distributors, Inc. VIGRE-AR-1 02082018 1425 |
Managements Discussion of Fund Performance
Invesco V.I. Global Real Estate Fund
Invesco V.I. Global Real Estate Fund
Your Funds Long-Term Performance
Results of a $10,000 Investment Oldest Share Class(es)
Fund and index data from 12/31/07
1 | Source: Lipper Inc. |
2 | Source: FactSet Research Systems Inc. |
3 | Source(s): Invesco, FactSet Research Systems Inc. |
Past performance cannot guarantee
comparable future results.
Invesco V.I. Global Real Estate Fund
Invesco V.I. Global Real Estate Funds investment objective is total return through growth of capital and current income.
∎ | Unless otherwise stated, information presented in this report is as of December 31, 2017, and is based on total net assets. |
∎ | Unless otherwise noted, all data provided by Invesco. |
Invesco V.I. Global Real Estate Fund
Invesco V.I. Global Real Estate Fund
Schedule of Investments
December 31, 2017
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Global Real Estate Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Global Real Estate Fund
Investment Abbreviations:
NVDR | Non-Voting Depositary Receipt | |
REIT | Real Estate Investment Trust | |
Wts. | Warrants |
Notes to Schedule of Investments:
(a) | Non-income producing security. |
(b) | Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended (the 1933 Act). The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The aggregate value of these securities at December 31, 2017 was $230,160, which represented less than 1% of the Funds Net Assets. |
(c) | Security valued using significant unobservable inputs (Level 3). See Note 3. |
(d) | The money market fund and the Fund are affiliated by having the same investment adviser. The rate shown is the 7-day SEC standardized yield as of December 31, 2017. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Global Real Estate Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Global Real Estate Fund
Statement of Changes in Net Assets
For the years ended December 31, 2017 and 2016
2017 | 2016 | |||||||
Operations: |
||||||||
Net investment income |
$ | 9,862,959 | $ | 6,742,282 | ||||
Net realized gain |
7,559,135 | 10,069,841 | ||||||
Change in net unrealized appreciation (depreciation) |
29,881,018 | (7,718,085 | ) | |||||
Net increase in net assets resulting from operations |
47,303,112 | 9,094,038 | ||||||
Distributions to shareholders from net investment income: |
||||||||
Series I |
(4,949,175 | ) | (2,467,652 | ) | ||||
Series ll |
(7,647,921 | ) | (3,330,972 | ) | ||||
Total distributions from net investment income |
(12,597,096 | ) | (5,798,624 | ) | ||||
Distributions to shareholders from net realized gains: |
||||||||
Series l |
(2,511,786 | ) | (2,886,843 | ) | ||||
Series ll |
(4,167,052 | ) | (4,517,031 | ) | ||||
Total distributions from net realized gains |
(6,678,838 | ) | (7,403,874 | ) | ||||
Share transactionsnet: |
||||||||
Series l |
(502,416 | ) | (62,147,357 | ) | ||||
Series ll |
26,512,911 | 13,734,445 | ||||||
Net increase (decrease) in net assets resulting from share transactions |
26,010,495 | (48,412,912 | ) | |||||
Net increase (decrease) in net assets |
54,037,673 | (52,521,372 | ) | |||||
Net assets: |
||||||||
Beginning of year |
364,274,851 | 416,796,223 | ||||||
End of year (includes undistributed net investment income of $3,481,441 and $3,664,608, respectively) |
$ | 418,312,524 | $ | 364,274,851 |
Notes to Financial Statements
December 31, 2017
NOTE 1Significant Accounting Policies
Invesco V.I. Global Real Estate Fund (the Fund) is a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Trust). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end series management investment company consisting of twenty-four separate portfolios, (each constituting a Fund). The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each Fund or class will be voted on exclusively by the shareholders of such Fund or class. Current Securities and Exchange Commission (SEC) guidance, however, requires participating insurance companies offering separate accounts to vote shares proportionally in accordance with the instructions of the contract owners whose investments are funded by shares of each Fund or class.
The Funds investment objective is total return through growth of capital and current income.
The Fund currently offers two classes of shares, Series I and Series II, both of which are offered to insurance company separate accounts funding variable annuity contracts and variable life insurance policies (variable products).
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946, Financial Services Investment Companies.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations Securities, including restricted securities, are valued according to the following policy. |
A security listed or traded on an exchange (except convertible securities) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and asked prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and asked prices. For purposes of determining net asset value (NAV) per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (NYSE).
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end-of-day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
Invesco V.I. Global Real Estate Fund
Debt obligations (including convertible securities) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual trading characteristics and other market data. Pricing services generally value debt obligations assuming orderly transactions of institutional round lot size, but a fund may hold or transact in the same securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Foreign securities (including foreign exchange contracts) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that the investment adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees.
Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trusts officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/asked quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a securitys fair value.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuers assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
B. | Securities Transactions and Investment Income Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any) is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Funds net asset value and, accordingly, they reduce the Funds total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and the Statement of Changes in Net Assets, or the net investment income per share and the ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund recharacterizes distributions received from REIT investments based on information provided by the REIT into the following categories: ordinary income, long-term and short-term capital gains, and return of capital. If information is not available on a timely basis from the REIT, the recharacterization will be based on available information which may include the previous years allocation. If new or additional information becomes available from the REIT at a later date, a recharacterization will be made in the following year. The Fund records as dividend income the amount recharacterized as ordinary income and as realized gain the amount recharacterized as capital gain in the Statement of Operations, and the amount recharacterized as return of capital as a reduction of the cost of the related investment. These recharacterizations are reflected in the accompanying financial statements.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. | Country Determination For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuers securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its |
Invesco V.I. Global Real Estate Fund
assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
D. | Distributions Distributions from net investment income and net realized capital gain, if any, are generally declared and paid to separate accounts of participating insurance companies annually and recorded on the ex-dividend date. |
E. | Federal Income Taxes The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the Internal Revenue Code), necessary to qualify as a regulated investment company and to distribute substantially all of the Funds taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. |
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Funds uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
F. | Expenses Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
G. | Accounting Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
H. | Indemnifications Under the Trusts organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Funds servicing agreements, that contain a variety of indemnification clauses. The Funds maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
I. | Foreign Currency Translations Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Funds books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. |
The Fund may invest in foreign securities, which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests and are shown in the Statement of Operations.
J. | Forward Foreign Currency Contracts The Fund may engage in foreign currency transactions either on a spot (i.e. for prompt delivery and settlement) basis, or through forward foreign currency contracts, to manage or minimize currency or exchange rate risk. |
The Fund may also enter into forward foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to lock in the U.S. dollar price of that security, or the Fund may also enter into forward foreign currency contracts that do not provide for physical settlement of the two currencies, but instead are settled by a single cash payment calculated as the difference between the agreed upon exchange rate and the spot rate at settlement based upon an agreed upon notional amount (non-deliverable forwards). The Fund will set aside liquid assets in an amount equal to the daily mark-to-market obligation for forward foreign currency contracts.
A forward foreign currency contract is an obligation between two parties (Counterparties) to purchase or sell a specific currency for an agreed-upon price at a future date. The use of forward foreign currency contracts does not eliminate fluctuations in the price of the underlying securities the Fund owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statement of Operations. The primary risks associated with forward foreign currency contracts include failure of the Counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities.
K. | Other Risks The Funds investments are concentrated in a comparatively narrow segment of the economy. Consequently, the Fund may tend to be more volatile than other mutual funds, and the value of the Funds investments may tend to rise and fall more rapidly. |
Because the Fund concentrates its assets in the real estate industry, an investment in the Fund will be closely linked to the performance of the real estate markets. Property values may fall due to increasing vacancies or declining rents resulting from economic, legal, cultural or technological developments.
Invesco V.I. Global Real Estate Fund
NOTE 2Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the Adviser or Invesco). Under the terms of the investment advisory agreement, the Fund accrues daily and pays monthly an advisory fee to the Adviser based on the annual rate of the Funds average daily net assets as follows:
Average Daily Net Assets | Rate | |||
First $250 million |
0.75% | |||
Next $250 million |
0.74% | |||
Next $500 million |
0.73% | |||
Next $1.5 billion |
0.72% | |||
Next $2.5 billion |
0.71% | |||
Next $2.5 billion |
0.70% | |||
Next $2.5 billion |
0.69% | |||
Over $10 billion |
0.68% |
For the year ended December 31, 2017, the effective advisory fees incurred by the Fund was 0.75%.
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. and separate sub-advisory agreements with Invesco PowerShares Capital Management LLC and Invesco Asset Management (India) Private Limited (collectively, the Affiliated Sub-Advisers) the Adviser, not the Fund, will pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2018, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Series I shares to 2.00% and Series II shares to 2.25% of average daily net assets (the expense limits). In determining the Advisers obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on June 30, 2018. During its term, the fee waiver agreement cannot be terminated or amended to increase the expense limits or reduce the advisory fee waiver without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
Further, the Adviser has contractually agreed, through at least June 30, 2019, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the year ended December 31, 2017, the Adviser waived advisory fees of $5,001.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco a fee for costs incurred in providing accounting services and fund administrative services to the Fund and to reimburse Invesco for fees paid to insurance companies that have agreed to provide certain administrative services to the Fund. These administrative services provided by the insurance companies may include, among other things: maintenance of master accounts with the Fund; tracking, recording and transmitting net purchase and redemption orders for Fund shares; maintaining and preserving records related to the purchase, redemption and other account activity of variable product owners; distributing copies of Fund documents such as prospectuses, proxy materials and periodic reports, to variable product owners, and responding to inquiries from variable product owners about the Fund. Pursuant to such agreement, for the year ended December 31, 2017, Invesco was paid $96,463 for accounting and fund administrative services and was reimbursed $596,297 for fees paid to insurance companies.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (IIS) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. For the year ended December 31, 2017, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
The Trust has entered into a master distribution agreement with Invesco Distributors, Inc. (IDI) to serve as the distributor for the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Funds Series II shares (the Plan). The Fund, pursuant to the Plan, pays IDI compensation at the annual rate of 0.25% of the Funds average daily net assets of Series II shares. The fees are accrued daily and paid monthly. Of the Plan payments, up to 0.25% of the average daily net assets of the Series II shares may be paid to insurance companies who furnish continuing personal shareholder services to customers who purchase and own Series II shares of the Fund. For the year ended December 31, 2017, expenses incurred under the Plan are detailed in the Statement of Operations as Distribution fees.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
Invesco V.I. Global Real Estate Fund
NOTE 3Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investments assigned level:
Level 1 | Prices are determined using quoted prices in an active market for identical assets. |
Level 2 | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Level 3 | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Funds own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of December 31, 2017. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
The Funds policy is to recognize transfers in and out of the valuation levels as of the end of the reporting period. During the year ended December 31, 2017, there were transfers from Level 1 to Level 2 of $26,976,158 and from Level 2 to Level 1 of $49,763,727, due to foreign fair value adjustments.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Investments in Securities |
||||||||||||||||
Australia |
$ | 1,495,724 | $ | 19,105,562 | $ | | $ | 20,601,286 | ||||||||
Brazil |
2,729,694 | | | 2,729,694 | ||||||||||||
Canada |
10,738,028 | | | 10,738,028 | ||||||||||||
Chile |
460,476 | | | 460,476 | ||||||||||||
China |
8,647,179 | 13,969,255 | | 22,616,434 | ||||||||||||
France |
15,338,100 | | | 15,338,100 | ||||||||||||
Germany |
| 18,924,259 | | 18,924,259 | ||||||||||||
Hong Kong |
19,830,579 | 11,907,248 | | 31,737,827 | ||||||||||||
India |
667,817 | | | 667,817 | ||||||||||||
Indonesia |
2,079,261 | | | 2,079,261 | ||||||||||||
Ireland |
1,626,329 | | | 1,626,329 | ||||||||||||
Japan |
21,151,465 | 15,952,348 | | 37,103,813 | ||||||||||||
Malaysia |
1,875,846 | | | 1,875,846 | ||||||||||||
Malta |
| | 0 | 0 | ||||||||||||
Mexico |
2,053,063 | | | 2,053,063 | ||||||||||||
Philippines |
1,456,520 | 2,179,158 | | 3,635,678 | ||||||||||||
Singapore |
5,002,694 | 4,294,465 | | 9,297,159 | ||||||||||||
South Africa |
4,222,247 | | | 4,222,247 | ||||||||||||
Spain |
| 2,817,019 | | 2,817,019 | ||||||||||||
Sweden |
| 6,033,876 | | 6,033,876 | ||||||||||||
Switzerland |
| 2,983,415 | | 2,983,415 | ||||||||||||
Thailand |
684,547 | 2,007,520 | | 2,692,067 | ||||||||||||
Turkey |
447,927 | | | 447,927 | ||||||||||||
United Arab Emirates |
544,067 | | | 544,067 | ||||||||||||
United Kingdom |
15,452,270 | 3,432,572 | | 18,884,842 | ||||||||||||
United States |
193,963,141 | | | 193,963,141 | ||||||||||||
Money Market Funds |
698,041 | | | 698,041 | ||||||||||||
Total Investments |
$ | 311,165,015 | $ | 103,606,697 | $ | 0 | $ | 414,771,712 |
Invesco V.I. Global Real Estate Fund
NOTE 4Trustees and Officers Fees and Benefits
Trustees and Officers Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees and Officers Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees were eligible to participate in a retirement plan that provided for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees and Officers Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 5Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period-end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 6Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended December 31, 2017 and 2016:
2017 | 2016 | |||||||
Ordinary income |
$ | 12,597,096 | $ | 5,798,624 | ||||
Long-term capital gain |
6,678,838 | 7,403,874 | ||||||
Total distributions |
$ | 19,275,934 | $ | 13,202,498 |
Tax Components of Net Assets at Period-End:
2017 | ||||
Undistributed ordinary income |
$ | 14,356,284 | ||
Undistributed long-term gain |
4,506,305 | |||
Net unrealized appreciation investments |
46,201,008 | |||
Net unrealized appreciation foreign currencies |
27,227 | |||
Temporary book/tax differences |
(68,523 | ) | ||
Shares of beneficial interest |
353,290,223 | |||
Total net assets |
$ | 418,312,524 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Funds net unrealized appreciation difference is attributable primarily to wash sales and the tax treatment of passive foreign investment companies.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Funds temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund does not have a capital loss carryforward as of December 31, 2017.
Invesco V.I. Global Real Estate Fund
NOTE 7Investment Transactions
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended December 31, 2017 was $214,779,487 and $195,473,059, respectively. Cost of investments, including any derivatives, on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investments on a Tax Basis | ||||
Aggregate unrealized appreciation of investments |
$ | 53,174,106 | ||
Aggregate unrealized (depreciation) of investments |
(6,973,098 | ) | ||
Net unrealized appreciation of investments |
$ | 46,201,008 | ||
Cost of investments for tax purposes is $368,570,704. |
NOTE 8Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of foreign currency transactions, and passive foreign investment companies, on December 31, 2017, undistributed net investment income was increased by $2,550,970 and undistributed net realized gain was decreased by $2,550,970. This reclassification had no effect on the net assets of the Fund.
NOTE 9Share Information
Summary of Share Activity | ||||||||||||||||
Years ended December 31, | ||||||||||||||||
2017(a) | 2016 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: |
||||||||||||||||
Series I |
1,590,286 | $ | 26,867,883 | 1,866,923 | $ | 31,090,102 | ||||||||||
Series II |
2,922,326 | 48,002,807 | 2,573,469 | 42,010,957 | ||||||||||||
Issued as reinvestment of dividends: |
||||||||||||||||
Series I |
441,738 | 7,460,961 | 307,377 | 5,354,495 | ||||||||||||
Series II |
720,865 | 11,814,973 | 463,556 | 7,848,003 | ||||||||||||
Reacquired: |
||||||||||||||||
Series I |
(2,054,075 | ) | (34,831,260 | ) | (5,815,971 | ) | (98,591,954 | ) | ||||||||
Series II |
(2,037,490 | ) | (33,304,869 | ) | (2,288,818 | ) | (36,124,515 | ) | ||||||||
Net increase (decrease) in share activity |
1,583,650 | $ | 26,010,495 | (2,893,464 | ) | $ | (48,412,912 | ) |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 59% of the outstanding shares of the Fund. The Fund and the Funds principal underwriter or adviser, are parties to participation agreements with these entities whereby these entities sell units of interest in separate accounts funding variable products that are invested in the Fund. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
Invesco V.I. Global Real Estate Fund
NOTE 10Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Net asset value, beginning of period |
Net investment income(a) |
Net gains (losses) on securities (both realized and unrealized) |
Total from investment operations |
Dividends from net investment income |
Distributions from net realized gains |
Total distributions |
Net asset value, end of period |
Total return(b) |
Net assets, end of period (000s omitted) |
Ratio of net assets |
Ratio of expenses to average net assets without fee waivers and/or expenses absorbed |
Ratio of net to average |
Portfolio turnover(c) |
|||||||||||||||||||||||||||||||||||||||||||
Series I |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/17 |
$ | 16.15 | $ | 0.45 | (d) | $ | 1.62 | $ | 2.07 | $ | (0.56 | ) | $ | (0.28 | ) | $ | (0.84 | ) | $ | 17.38 | 12.98 | % | $ | 158,229 | 1.02 | %(e) | 1.02 | %(e) | 2.63 | %(d)(e) | 50 | % | ||||||||||||||||||||||||
Year ended 12/31/16 |
16.36 | 0.30 | 0.08 | 0.38 | (0.27 | ) | (0.32 | ) | (0.59 | ) | 16.15 | 2.04 | 147,382 | 1.05 | 1.05 | 1.81 | 66 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 |
17.24 | 0.31 | (0.59 | ) | (0.28 | ) | (0.60 | ) | | (0.60 | ) | 16.36 | (1.48 | ) | 208,796 | 1.11 | 1.11 | 1.79 | 72 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 |
15.29 | 0.33 | 1.89 | 2.22 | (0.27 | ) | | (0.27 | ) | 17.24 | 14.62 | 209,829 | 1.10 | 1.10 | 1.99 | 44 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 |
15.47 | 0.22 | 0.21 | 0.43 | (0.61 | ) | | (0.61 | ) | 15.29 | 2.71 | 189,835 | 1.10 | 1.10 | 1.41 | 49 | ||||||||||||||||||||||||||||||||||||||||
Series II |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/17 |
15.69 | 0.39 | (d) | 1.58 | 1.97 | (0.52 | ) | (0.28 | ) | (0.80 | ) | 16.86 | 12.73 | 260,083 | 1.27 | (e) | 1.27 | (e) | 2.38 | (d)(e) | 50 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/16 |
15.91 | 0.25 | 0.08 | 0.33 | (0.23 | ) | (0.32 | ) | (0.55 | ) | 15.69 | 1.82 | 216,893 | 1.30 | 1.30 | 1.56 | 66 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 |
16.79 | 0.26 | (0.58 | ) | (0.32 | ) | (0.56 | ) | | (0.56 | ) | 15.91 | (1.74 | ) | 208,000 | 1.36 | 1.36 | 1.54 | 72 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 |
14.90 | 0.28 | 1.84 | 2.12 | (0.23 | ) | | (0.23 | ) | 16.79 | 14.34 | 200,299 | 1.35 | 1.35 | 1.74 | 44 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 |
15.11 | 0.18 | 0.20 | 0.38 | (0.59 | ) | | (0.59 | ) | 14.90 | 2.44 | 170,145 | 1.35 | 1.35 | 1.16 | 49 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year, if applicable, and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns. |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. |
(d) | Net investment income per share and the ratio of net investment income to average net assets includes significant dividends received during the period. Net investment income per share and the ratio of net investment income to average net assets excluding the significant dividends are $0.38 and 2.18% and $0.32 and 1.93% for Series I and Series II shares, respectively. |
(e) | Ratios are based on average daily net assets (000s omitted) of $154,707 and $242,958 for Series I and Series II shares, respectively. |
Invesco V.I. Global Real Estate Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
and Shareholders of Invesco V.I. Global Real Estate Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Invesco V.I. Global Real Estate Fund (one of the funds constituting AIM Variable Insurance Funds (Invesco Variable Insurance Funds), hereafter referred to as the Fund) as of December 31, 2017, the related statement of operations for the year ended December 31, 2017, the statement of changes in net assets for each of the two years in the period ended December 31, 2017, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2017 (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2017 and the financial highlights for each of the five years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Funds management. Our responsibility is to express an opinion on the Funds financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2017 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, TX
February 14, 2018
We have served as the auditor of one or more of the investment companies in the Invesco/PowerShares group of investment companies since at least 1995. We have not determined the specific year we began serving as auditor.
Invesco V.I. Global Real Estate Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period July 1, 2017 through December 31, 2017.
The actual and hypothetical expenses in the examples below do not represent the effect of any fees or other expenses assessed in connection with a variable product; if they did, the expenses shown would be higher while the ending account values shown would be lower.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled Actual Expenses Paid During Period to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Funds actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs. Therefore, the hypothetical information is useful in comparing ongoing costs, and will not help you determine the relative total costs of owning different funds.
Class |
Beginning |
ACTUAL | HYPOTHETICAL (5% annual return before expenses) |
Annualized Ratio |
||||||||||||||||||||
Ending Account Value (12/31/17)1 |
Expenses Paid During Period2 |
Ending Account Value (12/31/17) |
Expenses Paid During Period 2 |
|||||||||||||||||||||
Series I |
$ | 1,000.00 | $ | 1,064.60 | $ | 5.26 | $ | 1,020.11 | $ | 5.14 | 1.01 | % | ||||||||||||
Series II |
1,000.00 | 1,062.90 | 6.55 | 1,018.85 | 6.41 | 1.26 |
1 | The actual ending account value is based on the actual total return of the Fund for the period July 1, 2017 through December 31, 2017, after actual expenses and will differ from the hypothetical ending account value which is based on the Funds expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Funds annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half year. |
Invesco V.I. Global Real Estate Fund
Tax Information
Form 1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific states requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended December 31, 2017:
Federal and State Income Tax |
||||
Long-Term Capital Gain Distributions |
$ | 6,678,838 | ||
Corporate Dividends Received Deduction* |
0.00 | % | ||
U.S. Treasury Obligations* |
0.00 | % |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Funds fiscal year. |
Invesco V.I. Global Real Estate Fund
Trustees and Officers
The address of each trustee and officer is AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Trust), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trusts organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 1960 Trustee |
2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business
Formerly: Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US), Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) |
158 | None | ||||
Philip A. Taylor2 1954 Trustee and Senior Vice President |
2006 | Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco Aim Management Group, Inc.) (financial services holding company); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.) (registered transfer agent); Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company); Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management).
Formerly: Co-Chairman, Co-President and Co-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chief Executive Officer and President, Van Kampen Exchange Corp; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurers Series Trust (Invesco Treasurers Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurers Series Trust (Invesco Treasurers Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) (registered broker dealer); Manager, Invesco PowerShares Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco Aim Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurers Series Trust (Invesco Treasurers Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. |
158 | None |
1 | Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser. |
2 | Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser. |
Invesco V.I. Global Real Estate Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Independent Trustees | ||||||||
Bruce L. Crockett 1944 Trustee and Chair |
1993 | Chairman, Crockett Technologies Associates (technology consulting company)
Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute: Member of the Audit Committee, Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council |
158 | Director and Chairman of the Audit Committee, ALPS (Attorneys Liability Protection Society) (insurance company); Director and Member of the Audit Committee and Compensation Committee, Ferroglobe PLC (metallurgical company) | ||||
David C. Arch 1945 Trustee |
2010 | Chairman of Blistex Inc. (consumer health care products manufacturer); Member, World Presidents Organization | 158 | Board member of the Illinois Manufacturers Association | ||||
Jack M. Fields 1952 Trustee |
1997 | Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Chairman, Discovery Learning Alliance (non-profit)
Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff) (human resources provider); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives |
158 | None | ||||
Cynthia Hostetler 1962 Trustee |
2017 | Non-Executive Director and Trustee of a number of public and private business corporations
Formerly: Head of Investment Funds and Private Equity, Overseas Private Investment Corporation; President, First Manhattan Bancorporation, Inc.; Attorney, Simpson Thacher & Bartlett LLP |
158 | Vulcan Materials Company (construction materials company); Trilinc Global Impact Fund; Aberdeen Investment Funds (4 portfolios); Artio Global Investment LLC (mutual fund complex); Edgen Group, Inc. (specialized energy and infrastructure products distributor) | ||||
Eli Jones 1961 Trustee |
2016 | Professor and Dean, Mays Business School Texas A&M University
Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University; Director, Arvest Bank |
158 | Insperity, Inc. (formerly known as Administaff) (human resources provider) | ||||
Prema Mathai-Davis 1950 Trustee |
1998 | Retired. | 158 | None | ||||
Teresa M. Ressel 1962 Trustee |
2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Chief Financial Officer, Olayan America, The Olayan Group (international investor/commercial/industrial); Chief Executive Officer, UBS Securities LLC; Group Chief Operating Officer, Americas, UBS AG; Assistant Secretary for Management & Budget and CFO, US Department of the Treasury |
158 | Atlantic Power Corporation (power generation company); ON Semiconductor Corp. (semiconductor supplier) | ||||
Ann Barnett Stern 1957 Trustee |
2017 | President and Chief Executive Officer, Houston Endowment Inc. (private philanthropic institution)
Formerly: Executive Vice President and General Counsel, Texas Childrens Hospital; Attorney, Beck, Redden and Secrest, LLP; Business Law Instructor, University of St. Thomas; Attorney, Andrews & Kurth LLP |
158 | Federal Reserve Bank of Dallas | ||||
Raymond Stickel, Jr. 1944 Trustee |
2005 | Retired.
Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios); Partner, Deloitte & Touche |
158 | None | ||||
Robert C. Troccoli 1949 Trustee |
2016 | Adjunct Professor, University of Denver Daniels College of Business
Formerly: Senior Partner, KPMG LLP |
158 | None | ||||
Christopher L. Wilson 1957 Trustee |
2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Managing Partner, CT2, LLC (investing and consulting firm); President/Chief Executive Officer, Columbia Funds, Bank of America Corporation; President/Chief Executive Officer, CDC IXIS Asset Management Services, Inc.; Principal & Director of Operations, Scudder Funds, Scudder, Stevens & Clark, Inc.; Assistant Vice President, Fidelity Investments |
158 | TD Asset Management USA Inc. (mutual fund complex) (22 portfolios); ISO New England, Inc. (non-profit organization managing regional electricity market) |
Invesco V.I. Global Real Estate Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers | ||||||||
Sheri Morris 1964 President, Principal Executive Officer and Treasurer |
1999 | President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco Aim Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; and Treasurer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust and PowerShares Actively Managed Exchange-Traded Fund Trust |
N/A | N/A | ||||
Russell C. Burk 1958 Senior Vice President and Senior Officer |
2005 | Senior Vice President and Senior Officer, The Invesco Funds | N/A | N/A | ||||
John M. Zerr 1962 Senior Vice President, Chief Legal Officer and Secretary |
2006 | Director, Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Managing Director, Invesco PowerShares Capital Management LLC; Director, Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust; Manager and Secretary, Invesco Indexing LLC
Formerly: Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser); Vice President and Secretary, PBHG Funds (an investment company) and PBHG Insurance Series Fund (an investment company); Chief Operating Officer, General Counsel and Secretary, Old Mutual Investment Partners (a broker-dealer); General Counsel and Secretary, Old Mutual Fund Services (an administrator) and Old Mutual Shareholder Services (a shareholder servicing center); Executive Vice President, General Counsel and Secretary, Old Mutual Capital, Inc. (an investment adviser); and Vice President and Secretary, Old Mutual Advisors Funds (an investment company) |
N/A | N/A | ||||
Gregory G. McGreevey 1962 Senior Vice President |
2012 | Senior Managing Director, Invesco Ltd.; Director, Chairman, President, and Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President, Invesco Management Group, Inc.; Director, Invesco Mortgage Capital, Inc. and Invesco Senior Secured Management, Inc.; and Senior Vice President, The Invesco Funds
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A | ||||
Kelli Gallegos 1970 Vice President, Principal Financial Officer and Assistant Treasurer |
2008 | Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A |
Invesco V.I. Global Real Estate Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers(continued) | ||||||||
Tracy Sullivan 1962 Vice President, Chief Tax Officer and Assistant Treasurer |
2008 | Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A | ||||
Crissie M. Wisdom 1969 Anti-Money Laundering Compliance Officer |
2013 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., Invesco Management Group, Inc., The Invesco Funds, and PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp. |
N/A | N/A | ||||
Robert R. Leveille 1969 Chief Compliance Officer |
2016 | Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds
Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds |
N/A | N/A |
The Statement of Additional Information of the Trust includes additional information about the Funds Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Funds Statement of Additional Information for information on the Funds sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 |
Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Auditors PricewaterhouseCoopers LLP 1000 Louisiana Street, Suite 5800 Houston, TX 77002-5678 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2005 Market Street, Suite 2600 Philadelphia, PA 19103-7018 |
Counsel to the Independent Trustees Goodwin Procter LLP 901 New York Avenue, N.W. Washington, D.C. 20001 |
Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
Invesco V.I. Global Real Estate Fund
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Annual Report to Shareholders
|
December 31, 2017 | |||
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Invesco V.I. Government Money Market Fund
|
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Funds semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The Funds Form N-Q filings are available on the SEC website, sec.gov. Copies of the Funds Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-07452 and 033-57340. The Funds most recent portfolio holdings, as filed on Form N-Q, have also been made available to insurance companies issuing variable annuity contracts and variable life insurance policies (variable products) that invest in the Fund. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/ proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
This report must be accompanied or preceded by a currently effective Fund prospectus and variable product prospectus, which contain more complete information, including sales charges and expenses. Investors should read each carefully before investing.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE | ||
Invesco Distributors, Inc. VIGMKT-AR-1 02072018 1117 |
Managements Discussion
Invesco V.I. Government Money Market Fund
Invesco V.I. Government Money Market Funds investment objective is to provide current income consistent with preservation of capital and liquidity.
∎ | Unless otherwise stated, information presented in this report is as of December 31, 2017, and is based on total net assets. |
∎ | Unless otherwise noted, all data provided by Invesco. |
Invesco V.I. Government Money Market Fund
Schedule of Investments
December 31, 2017
Interest Rate |
Maturity Date |
Principal Amount (000) |
Value | |||||||||||||
U.S. Government Sponsored Agency Securities31.02% |
| |||||||||||||||
Federal Farm Credit Bank (FFCB)3.02% | ||||||||||||||||
Unsec. Bonds (1 mo. USD LIBOR + 0.03%)(a) |
1.52 | % | 01/17/2018 | $ | 5,715 | $ | 5,714,943 | |||||||||
Unsec. Bonds (3 mo. USD LIBOR 0.03%)(a) |
1.46 | % | 03/02/2018 | 5,000 | 5,001,323 | |||||||||||
Unsec. Bonds (3 mo. USD LIBOR 0.05%)(a) |
1.62 | % | 03/26/2018 | 1,200 | 1,200,718 | |||||||||||
Unsec. Bonds (1 mo. USD LIBOR + 0.02%)(a) |
1.51 | % | 05/17/2018 | 3,000 | 3,000,000 | |||||||||||
Unsec. Bonds (3 mo. USD LIBOR + 0.02%)(a) |
1.47 | % | 05/22/2018 | 2,500 | 2,503,197 | |||||||||||
Unsec. Bonds (1 mo. USD LIBOR 0.06%)(a) |
1.31 | % | 12/04/2019 | 5,000 | 4,999,749 | |||||||||||
22,419,930 | ||||||||||||||||
Federal Home Loan Bank (FHLB)24.56% | ||||||||||||||||
Unsec. Bonds (3 mo. USD LIBOR 0.07%)(a) |
1.31 | % | 01/26/2018 | 3,000 | 3,000,207 | |||||||||||
Unsec. Global Bonds (3 mo. USD LIBOR 0.15%)(a) |
1.30 | % | 02/23/2018 | 4,000 | 4,000,000 | |||||||||||
Unsec. Bonds (3 mo. USD LIBOR 0.16%)(a) |
1.30 | % | 02/26/2018 | 2,000 | 2,000,646 | |||||||||||
Unsec. Disc. Notes(b) |
1.40 | % | 03/26/2018 | 1,251 | 1,246,962 | |||||||||||
Unsec. Global Bonds (3 mo. USD LIBOR 0.18%)(a) |
1.50 | % | 03/26/2018 | 5,000 | 5,000,000 | |||||||||||
Unsec. Disc. Notes(b) |
1.39 | % | 03/28/2018 | 15,000 | 14,950,771 | |||||||||||
Unsec. Bonds (3 mo. USD LIBOR 0.26%)(a) |
1.10 | % | 04/13/2018 | 5,000 | 4,999,989 | |||||||||||
Unsec. Bonds (3 mo. USD LIBOR 0.26%)(a) |
1.10 | % | 04/13/2018 | 3,000 | 2,999,990 | |||||||||||
Unsec. Bonds (3 mo. USD LIBOR 0.27%)(a) |
1.09 | % | 04/23/2018 | 4,000 | 3,999,938 | |||||||||||
Unsec. Global Bonds (3 mo. USD LIBOR 0.35%)(a) |
1.06 | % | 05/14/2018 | 10,000 | 9,998,532 | |||||||||||
Unsec. Bonds (1 mo. USD LIBOR 0.11%)(a) |
1.26 | % | 08/01/2018 | 5,000 | 5,000,000 | |||||||||||
Unsec. Bonds (3 mo. USD LIBOR 0.31%)(a) |
1.11 | % | 08/15/2018 | 12,000 | 11,997,238 | |||||||||||
Unsec. Bonds (1 mo. USD LIBOR 0.13%)(a) |
1.30 | % | 10/10/2018 | 3,000 | 3,000,000 | |||||||||||
Unsec. Bonds (1 mo. USD LIBOR 0.13%)(a) |
1.30 | % | 10/10/2018 | 10,000 | 10,000,000 | |||||||||||
Unsec. Bonds (1 mo. USD LIBOR 0.13%)(a) |
1.25 | % | 11/05/2018 | 12,000 | 12,000,000 | |||||||||||
Unsec. Bonds (1 mo. USD LIBOR 0.13%)(a) |
1.30 | % | 11/09/2018 | 3,000 | 3,000,000 | |||||||||||
Unsec. Bonds (1 mo. USD LIBOR 0.12%)(a) |
1.36 | % | 12/14/2018 | 10,000 | 10,000,000 | |||||||||||
Unsec. Global Bonds (1 mo. USD LIBOR 0.12%)(a) |
1.39 | % | 12/21/2018 | 5,000 | 5,000,000 | |||||||||||
Unsec. Bonds (1 mo. USD LIBOR 0.09%)(a) |
1.38 | % | 01/14/2019 | 9,000 | 9,000,000 | |||||||||||
Unsec. Bonds (1 mo. USD LIBOR 0.08%)(a) |
1.35 | % | 02/11/2019 | 3,000 | 3,000,000 | |||||||||||
Unsec. Bonds (1 mo. USD LIBOR 0.08%)(a) |
1.35 | % | 02/11/2019 | 5,000 | 5,000,000 | |||||||||||
Unsec. Bonds (1 mo. USD LIBOR 0.07%)(a) |
1.41 | % | 02/15/2019 | 10,000 | 10,000,000 | |||||||||||
Unsec. Bonds (1 mo. USD LIBOR 0.08%)(a) |
1.49 | % | 02/28/2019 | 5,000 | 5,000,000 | |||||||||||
Unsec. Bonds (1 mo. USD LIBOR 0.08%)(a) |
1.31 | % | 03/06/2019 | 8,000 | 8,000,000 | |||||||||||
Unsec. Bonds (1 mo. USD LIBOR 0.08%)(a) |
1.42 | % | 03/20/2019 | 2,000 | 2,000,000 | |||||||||||
Unsec. Bonds (1 mo. USD LIBOR 0.11%)(a) |
1.43 | % | 04/22/2019 | 3,000 | 3,000,000 | |||||||||||
Unsec. Bonds (1 mo. USD LIBOR 0.09%)(a) |
1.40 | % | 05/17/2019 | 20,000 | 20,000,000 | |||||||||||
Unsec. Global Bonds (1 mo. USD LIBOR 0.09%)(a) |
1.39 | % | 06/14/2019 | 5,000 | 5,000,000 | |||||||||||
182,194,273 | ||||||||||||||||
Overseas Private Investment Corp. (OPIC)3.44% | ||||||||||||||||
Unsec. Gtd. VRD COP Bonds (3 mo. U.S. Treasury Bill Rate)(c) |
1.49 | % | 09/15/2020 | 5,000 | 5,000,000 | |||||||||||
Sr. Unsec. Gtd. VRD COP Bonds (3 mo. U.S. Treasury Bill Rate)(c) |
1.49 | % | 06/15/2025 | 3,000 | 3,000,000 | |||||||||||
Sr. Unsec. Gtd. VRD COP Bonds (3 mo. U.S. Treasury Bill Rate)(c) |
1.49 | % | 02/15/2028 | 10,000 | 10,000,000 | |||||||||||
Unsec. Gtd. VRD COP Bonds (3 mo. U.S. Treasury Bill Rate)(c) |
1.55 | % | 07/07/2040 | 7,500 | 7,500,000 | |||||||||||
25,500,000 | ||||||||||||||||
Total U.S. Government Sponsored Agency Securities (Cost $230,114,203) |
230,114,203 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Government Money Market Fund
Interest Rate |
Maturity Date |
Principal Amount (000) |
Value | |||||||||||||
U.S. Treasury Securities16.15% |
| |||||||||||||||
U.S. Treasury Bills12.78%(b) | ||||||||||||||||
U.S. Treasury Bills |
1.09 | % | 01/18/2018 | $ | 15,000 | $ | 14,988,930 | |||||||||
U.S. Treasury Bills |
1.13 | % | 02/01/2018 | 15,000 | 14,985,875 | |||||||||||
U.S. Treasury Bills |
1.19 | % | 02/08/2018 | 15,000 | 14,981,731 | |||||||||||
U.S. Treasury Bills |
1.29 | % | 03/08/2018 | 15,000 | 14,965,063 | |||||||||||
U.S. Treasury Bills |
1.32 | % | 03/15/2018 | 15,000 | 14,960,400 | |||||||||||
U.S. Treasury Bills |
1.23 | % | 04/12/2018 | 15,000 | 14,949,167 | |||||||||||
U.S. Treasury Bills |
1.54 | % | 06/28/2018 | 5,000 | 4,962,387 | |||||||||||
Total U.S. Treasury Bills (Cost $94,793,553) |
94,793,553 | |||||||||||||||
U.S. Treasury Notes3.37% | ||||||||||||||||
U.S. Treasury Floating Rate Notes (3 mo. U.S. Treasury Bill Money Market Yield Rate + 0.07%)(a) |
1.52 | % | 04/30/2019 | 11,000 | 11,001,588 | |||||||||||
U.S. Treasury Floating Rate Notes (3 mo. U.S. Treasury Bill Money Market Yield Rate + 0.06%)(a) |
1.51 | % | 07/31/2019 | 6,000 | 5,999,796 | |||||||||||
U.S. Treasury Floating Rate Notes (3 mo. U.S. Treasury Bill Money Market Yield Rate + 0.05%)(a) |
1.50 | % | 10/31/2019 | 8,000 | 8,001,877 | |||||||||||
Total U.S. Treasury Notes (Cost $25,003,261) |
25,003,261 | |||||||||||||||
Total U.S. Treasury Securities (Cost $119,796,814) |
119,796,814 | |||||||||||||||
TOTAL INVESTMENTS IN SECURITIES (excluding Repurchase Agreements)47.17% (Cost $349,911,017) |
349,911,017 | |||||||||||||||
Repurchase Amount |
||||||||||||||||
Repurchase Agreements59.51%(d) |
||||||||||||||||
ABN AMRO Bank N.V., joint agreement dated 12/29/2017, aggregate maturing value of $700,000,000 (collateralized by U.S. Treasury obligations and domestic agency mortgage-backed securities valued at $714,000,014; 0.13%-6.50%; 10/31/2018-04/20/2047) |
1.41 | % | 01/02/2018 | 35,000,000 | 35,000,000 | |||||||||||
Bank of Nova Scotia, joint agreement dated 12/29/2017, aggregate maturing value of $200,000,000 (collateralized by domestic agency mortgage-backed securities valued at $204,000,000; 2.50%-6.50%; 04/01/2026-11/01/2047) |
1.38 | % | 01/02/2018 | 35,000,000 | 35,000,000 | |||||||||||
BNP Paribas Securities Corp., joint agreement dated 12/29/2017, aggregate maturing value of $400,062,222 (collateralized by U.S. Treasury obligations valued at $407,776,966; 0.13%; 04/15/2019-04/15/2021) |
1.40 | % | 01/02/2018 | 30,004,667 | 30,000,000 | |||||||||||
BNP Paribas Securities Corp., joint term agreement dated 12/28/2017, aggregate maturing value of $250,067,083 (collateralized by U.S. Treasury obligations valued at $255,234,376; 0.13%; 07/15/2022)(e) |
1.38 | % | 01/04/2018 | 25,006,708 | 25,000,000 | |||||||||||
Canadian Imperial Bank of Commerce, joint term agreement dated 12/14/2017, aggregate maturing value of $775,000,000 (collateralized by domestic agency mortgage-backed securities and U.S. Treasury obligations valued at $790,500,000; 1.50%-4.50%; 09/30/2024-10/01/2047)(e) |
1.34 | % | 01/12/2018 | 25,000,000 | 25,000,000 | |||||||||||
Fixed Income Clearing Corp.-Bank of New York Mellon (The), agreement dated 12/29/2017, maturing value of $70,000,000 (collateralized by a U.S. Treasury obligation valued at $71,400,083; 1.13%; 09/30/2021) |
1.44 | % | 01/02/2018 | 70,000,000 | 70,000,000 | |||||||||||
ING Financial Markets, LLC, joint term agreement dated 12/14/2017, aggregate maturing value of $375,000,000 (collateralized by U.S. Treasury obligations and domestic agency mortgage-backed securities valued at $382,500,138; 1.88%-7.00%; 04/01/2020-01/01/2048) |
1.40 | % | 03/22/2018 | 3,000,000 | 3,000,000 | |||||||||||
Lloyds Bank PLC, joint term agreement dated 12/04/2017, aggregate maturing value of $501,794,722 (collateralized by U.S. Treasury obligations valued at $509,215,248; 1.38%-3.13%; 06/30/2020-08/15/2025) |
1.42 | % | 03/05/2018 | 15,053,842 | 15,000,000 | |||||||||||
Lloyds Bank PLC, joint term agreement dated 12/11/2017, aggregate maturing value of $500,695,139 (collateralized by U.S. Treasury obligations valued at $509,630,515; 1.00%-2.63%; 11/30/2019-11/15/2020) |
1.43 | % | 01/17/2018 | 5,006,951 | 5,000,000 | |||||||||||
Lloyds Bank PLC, joint term agreement dated 12/11/2017, aggregate maturing value of $500,871,944 (collateralized by U.S. Treasury obligations valued at $509,518,277; 1.00%-7.50%; 10/31/2019-11/15/2024) |
1.46 | % | 01/25/2018 | 10,017,439 | 10,000,000 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Government Money Market Fund
Interest Rate |
Maturity Date |
Repurchase |
Value | |||||||||||||
Metropolitan Life Insurance Co., joint term agreement dated 12/27/2017, aggregate maturing value of $700,198,098 (collateralized by U.S. Treasury obligations valued at $720,425,977; 0%-4.50%; 01/25/2018-02/15/2043)(e) |
1.42 | % | 01/03/2018 | $ | 15,005,004 | $ | 15,000,863 | |||||||||
Mitsubishi UFJ Trust and Banking Corp., joint term agreement dated 12/27/2017, aggregate maturing value of $1,397,005,192 (collateralized by U.S. Treasury obligations valued at $1,430,453,729; 0%-2.25%; 09/30/2021-08/15/2045)(e) |
1.40 | % | 01/03/2018 | 14,441,430 | 14,437,500 | |||||||||||
RBC Capital Markets LLC, joint term agreement dated 12/14/2017, aggregate maturing value of $1,100,000,000 (collateralized by domestic agency mortgage-backed securities, U.S. Treasury obligations and U.S. government sponsored agency obligations valued at $1,122,000,015; 0%-7.00%; 04/30/2019-11/20/2064)(e) |
1.35 | % | 02/01/2018 | 10,000,000 | 10,000,000 | |||||||||||
RBC Capital Markets LLC, joint term agreement dated 12/15/2017, aggregate maturing value of $75,000,000 (collateralized by domestic agency mortgage-backed securities valued at $76,500,001; 2.35%-4.00%; 05/01/2030-01/25/2048)(e) |
1.35 | % | 02/02/2018 | 5,000,000 | 5,000,000 | |||||||||||
RBC Capital Markets LLC, joint term agreement dated 12/29/2017, aggregate maturing value of $1,000,000,000 (collateralized by domestic agency mortgage-backed securities valued at $1,020,000,000; 0%-7.00%; 03/01/2018-04/25/2053)(e) |
1.42 | % | 02/28/2018 | 45,000,000 | 45,000,000 | |||||||||||
Societe Generale, joint open agreement dated 04/27/2017 (collateralized by domestic agency mortgage-backed securities, U.S. Treasury obligations and U.S. government sponsored agency obligations valued at $1,530,000,091; 0%-9.00%; 12/31/2017-08/15/2047)(f) |
0.83 | % | | | 30,000,000 | |||||||||||
Sumitomo Mitsui Banking Corp., joint agreement dated 12/29/2017, aggregate maturing value of $3,000,000,000 (collateralized by domestic agency mortgage-backed securities valued at $3,060,000,001; 3.00%-3.50%; 05/20/2045-07/20/2047) |
1.43 | % | 01/02/2018 | 34,103,272 | 34,103,272 | |||||||||||
Wells Fargo Securities, LLC, joint agreement dated 12/29/2017, aggregate maturing value of $760,000,000 (collateralized by domestic agency mortgage-backed securities valued at $775,200,000; 4.00%; 12/01/2047-01/01/2048) |
1.41 | % | 01/02/2018 | 35,000,000 | 35,000,000 | |||||||||||
Total Repurchase Agreements (Cost $441,541,635) |
441,541,635 | |||||||||||||||
TOTAL INVESTMENTS IN SECURITIES(g)106.68% (Cost $791,452,652) |
791,452,652 | |||||||||||||||
OTHER ASSETS LESS LIABILITIES(6.68)% |
(49,543,250 | ) | ||||||||||||||
NET ASSETS100.00% |
$ | 741,909,402 |
Investment Abbreviations:
COP | Certificates of Participation | |
Disc. | Discounted | |
Gtd. | Guaranteed | |
LIBOR | London Interbank Offered Rate | |
Sr. | Senior | |
Unsec. | Unsecured | |
USD | U.S. Dollar | |
VRD | Variable Rate Demand |
Notes to Schedule of Investments:
(a) | Interest or dividend rate is redetermined periodically. Rate shown is the rate in effect on December 31, 2017. |
(b) | Security may be traded on a discount basis. The interest rate shown represents the discount rate at the time of purchase by the Fund. |
(c) | Demand security payable upon demand by the Fund at specified time intervals no greater than thirteen months. Interest rate is redetermined periodically based on current market interest rates. Rate shown is the rate in effect on December 31, 2017. |
(d) | Principal amount equals value at period end. See Note 1I. |
(e) | The Fund may demand payment of the term repurchase agreement upon one to seven business days notice depending on the timing of the demand. |
(f) | Either party may terminate the agreement upon demand. Interest rates, principal amount and collateral are redetermined daily. |
(g) | Also represents cost for federal income tax purposes. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Government Money Market Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Government Money Market Fund
Statement of Changes in Net Assets
For the years ended December 31, 2017 and 2016
2017 | 2016 | |||||||
Operations: |
||||||||
Net investment income |
$ | 3,798,339 | $ | 667,531 | ||||
Net realized gain (loss) |
(17,357 | ) | 8,180 | |||||
Net increase in net assets resulting from operations |
3,780,982 | 675,711 | ||||||
Distributions to shareholders from net investment income: |
||||||||
Series I |
(3,515,426 | ) | (637,907 | ) | ||||
Series ll |
(282,913 | ) | (29,624 | ) | ||||
Total distributions from net investment income |
(3,798,339 | ) | (667,531 | ) | ||||
Share transactions-net: |
||||||||
Series l |
19,851,083 | (101,332,142 | ) | |||||
Series ll |
(11,818,876 | ) | 73,420,621 | |||||
Net increase (decrease) in net assets resulting from share transactions |
8,032,207 | (27,911,521 | ) | |||||
Net increase (decrease) in net assets |
8,014,850 | (27,903,341 | ) | |||||
Net assets: |
||||||||
Beginning of year |
733,894,552 | 761,797,893 | ||||||
End of year (includes undistributed net investment income of $2,617 and $(5,563), respectively) |
$ | 741,909,402 | $ | 733,894,552 |
Notes to Financial Statements
December 31, 2017
NOTE 1Significant Accounting Policies
Invesco V.I. Government Money Market Fund (the Fund) is a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Trust). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end series management investment company consisting of twenty-four separate portfolios, (each constituting a Fund). The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each Fund or class will be voted on exclusively by the shareholders of such Fund or class. Current Securities and Exchange Commission (SEC) guidance, however, requires participating insurance companies offering separate accounts to vote shares proportionally in accordance with the instructions of the contract owners whose investments are funded by shares of each Fund or class.
The Funds investment objective is to provide current income consistent with preservation of capital and liquidity.
The Fund currently offers two classes of shares, Series I and Series II, both of which are offered to insurance company separate accounts funding variable annuity contracts and variable life insurance policies (variable products).
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946, Financial Services Investment Companies.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations The Funds securities are recorded on the basis of amortized cost which approximates value as permitted by Rule 2a-7 under the 1940 Act. This method values a security at its cost on the date of purchase and, thereafter, assumes a constant amortization to maturity of any premiums or accretion of any discounts. |
Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
B. | Securities Transactions and Investment Income Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any) is recorded on the accrual basis from settlement date. Bond premiums and discounts are amortized and/or accreted over the lives of the respective securities. Pay-in-kind interest income and non-cash dividend income received in the form of securities in-lieu of cash are recorded at the fair value of the securities received. Paydown gains and losses on mortgage and asset-backed securities are recorded as adjustments to interest income. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Invesco V.I. Government Money Market Fund
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Funds net asset value and, accordingly, they reduce the Funds total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and the Statement of Changes in Net Assets, or the net investment income per share and the ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates realized and unrealized capital gains and losses to a class based on the relative net assets of each class. The Fund allocates income to a class based on the relative value of the settled shares of each class.
C. | Country Determination For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuers securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
D. | Distributions Distributions from net investment income, if any, are declared daily and paid monthly to separate accounts of participating insurance companies. Distributions from net realized gain, if any, are generally declared and paid annually and recorded on the ex-dividend date. |
E. | Federal Income Taxes The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the Internal Revenue Code), necessary to qualify as a regulated investment company and to distribute substantially all of the Funds taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. |
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Funds uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
F. | Expenses Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
G. | Accounting Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
H. | Indemnifications Under the Trusts organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Funds servicing agreements, that contain a variety of indemnification clauses. The Funds maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
I. | Repurchase Agreements The Fund may enter into repurchase agreements. Collateral on repurchase agreements, including the Funds pro-rata interest in joint repurchase agreements, is taken into possession by the Fund upon entering into the repurchase agreement. Collateral consisting of U.S. Government Securities and U.S. Government Sponsored Agency Securities is marked to market daily to ensure its market value is at least 102% of the sales price of the repurchase agreement. The investments in some repurchase agreements, pursuant to procedures approved by the Board of Trustees, are through participation with other mutual funds, private accounts and certain non-registered investment companies managed by the investment advisor or its affiliates (Joint repurchase agreements). The principal amount of the repurchase agreement is equal to the value at period-end. If the seller of a repurchase agreement fails to repurchase the security in accordance with the terms of the agreement, the Fund might incur expenses in enforcing its rights, and could experience losses, including a decline in the value of the collateral and loss of income. |
J. | Other Risks Investments in obligations issued by agencies and instrumentalities of the U.S. Government may vary in the level of support they receive from the government. The government may choose not to provide financial support to government sponsored agencies or instrumentalities if it is not legally obligated to do so. In this case, if the issuer defaulted, the Fund may not be able to recover its investment in such issuer from the U.S. Government. |
NOTE 2Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the Adviser or Invesco). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Adviser based on the annual rate of 0.15% of the Funds average daily net assets.
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. and separate sub-advisory agreements with Invesco PowerShares Capital Management LLC and Invesco Asset Management (India) Private Limited (collectively, the Affiliated Sub-Advisers) the Adviser, not the Fund, will pay 40% of the fees paid to the Adviser to any such
Invesco V.I. Government Money Market Fund
Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2018, to waive advisory fees and/or reimburse expenses to the extent necessary to limit total annual operating expenses after fee waivers and/or expense reimbursements (excluding certain items discussed below) of Series I shares to 1.50% and Series II shares to 1.75% of average daily net assets (the expense limits). In determining the Advisers obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual operating expenses after fee waivers and/or expense reimbursements to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on June 30, 2018. During its term, the fee waiver agreement cannot be terminated or amended to increase the expense limits or reduce the advisory fee waiver without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
The Adviser and/or Invesco Distributors, Inc., (IDI) voluntarily agreed to waive fees and/or reimburse expenses in order to increase the Funds yield. Voluntary fee waivers and/or reimbursements may be modified at any time upon consultation with the Board of Trustees without further notice to investors.
For the year ended December 31, 2017, Invesco voluntarily reimbursed class level expenses of $2,159 for Series II shares in order to increase the Funds yield.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco a fee for costs incurred in providing accounting services and fund administrative services to the Fund and to reimburse Invesco for fees paid to insurance companies that have agreed to provide certain administrative services to the Fund. These administrative services provided by the insurance companies may include, among other things: maintenance of master accounts with the Fund; tracking, recording and transmitting net purchase and redemption orders for Fund shares; maintaining and preserving records related to the purchase, redemption and other account activity of variable product owners; distributing copies of Fund documents such as prospectuses, proxy materials and periodic reports, to variable product owners, and responding to inquiries from variable product owners about the Fund. Pursuant to such agreement, for the year ended December 31, 2017, Invesco was paid $383,715 for accounting and fund administrative services and was reimbursed $1,043,654 for fees paid to insurance companies.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (IIS) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. For the year ended December 31, 2017, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
The Trust has entered into a master distribution agreement with IDI to serve as the distributor for the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Funds Series II shares (the Plan). The Fund, pursuant to the Plan, pays IDI compensation at the annual rate of 0.25% of the Funds average daily net assets of Series II shares. The fees are accrued daily and paid monthly. Of the Plan payments, up to 0.25% of the average daily net assets of the Series II shares may be paid to insurance companies who furnish continuing personal shareholder services to customers who purchase and own Series II shares of the Fund. For the year ended December 31, 2017, expenses incurred under the Plan are detailed in the Statement of Operations as Distribution fees.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
NOTE 3Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investments assigned level:
Level 1 | Prices are determined using quoted prices in an active market for identical assets. |
Level 2 | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Level 3 | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Funds own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
As of December 31, 2017, all of the securities in this Fund were valued based on Level 2 inputs (see the Schedule of Investments for security categories). The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
The Funds policy is to recognize transfers in and out of the valuation levels as of the end of the reporting period. During the year ended December 31, 2017, there were no material transfers between valuation levels.
Invesco V.I. Government Money Market Fund
NOTE 4Trustees and Officers Fees and Benefits
Trustees and Officers Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees and Officers Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees were eligible to participate in a retirement plan that provided for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees and Officers Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 5Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with The Bank of New York Mellon, the custodian bank. Such balances, if any at period-end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 6Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended December 31, 2017 and 2016:
2017 | 2016 | |||||||
Ordinary income |
$ | 3,798,339 | $ | 667,531 |
Tax Components of Net Assets at Period-End:
2017 | ||||
Undistributed ordinary income |
$ | 55,710 | ||
Temporary book/tax differences |
(53,093 | ) | ||
Capital loss carryforward |
(17,357 | ) | ||
Shares of beneficial interest |
741,924,142 | |||
Total net assets |
$ | 741,909,402 |
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Funds temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund has a capital loss carryforward as of December 31, 2017, which expires as follows:
Capital Loss Carryforward* | ||||||||||||
Expiration | Short-Term | Long-Term | Total | |||||||||
Not subject to expiration |
$ | 17,357 | $ | | $ | 17,357 |
* | Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code and may be further limited depending upon a variety of factors, including the realization of net unrealized gains or losses as of the date of any reorganization. |
NOTE 7Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of distributions, on December 31, 2017, undistributed net investment income was increased by $8,180 and undistributed net realized gain (loss) was decreased by $8,180. This reclassification had no effect on the net assets of the Fund.
Invesco V.I. Government Money Market Fund
NOTE 8Share Information
Summary of Share Activity | ||||||||||||||||
Years ended December 31, | ||||||||||||||||
2017(a) | 2016 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: |
||||||||||||||||
Series I |
1,456,355,567 | $ | 1,456,355,567 | 1,047,450,351 | $ | 1,047,450,351 | ||||||||||
Series II |
45,247,987 | 45,247,987 | 145,053,508 | 145,053,508 | ||||||||||||
Issued as reinvestment of dividends: |
||||||||||||||||
Series I |
3,422,005 | 3,422,005 | 622,014 | 622,014 | ||||||||||||
Series II |
282,913 | 282,913 | 29,624 | 29,624 | ||||||||||||
Reacquired: |
||||||||||||||||
Series I |
(1,439,926,489 | ) | (1,439,926,489 | ) | (1,149,404,507 | ) | (1,149,404,507 | ) | ||||||||
Series II |
(57,349,776 | ) | (57,349,776 | ) | (71,662,511 | ) | (71,662,511 | ) | ||||||||
Net increase (decrease) in share activity |
8,032,207 | $ | 8,032,207 | (27,911,521 | ) | $ | (27,911,521 | ) |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 92% of the outstanding shares of the Fund. The Fund and the Funds principal underwriter or adviser, are parties to participation agreements with these entities whereby these entities sell units of interest in separate accounts funding variable products that are invested in the Fund. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
NOTE 9Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Net asset value, beginning of period |
Net investment income(a) |
Net realized gains (losses) on securities |
Total from investment operations |
Dividends from net investment income |
Net asset value, end of period |
Total return(b) |
Net assets, end of period (000s omitted) |
Ratio
of expenses to average net assets with fee waivers and/or expenses absorbed |
Ratio of expenses to average net assets without fee waivers and/or expenses absorbed |
Ratio of net investment income to average net assets |
||||||||||||||||||||||||||||||||||
Series I |
||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/17 |
$ | 1.00 | $ | 0.01 | $ | (0.00 | ) | $ | 0.01 | $ | (0.01 | ) | $ | 1.00 | 0.56 | % | $ | 656,368 | 0.40 | %(c) | 0.40 | %(c) | 0.56 | %(c) | ||||||||||||||||||||
Year ended 12/31/16 |
1.00 | 0.00 | 0.00 | 0.00 | (0.00 | ) | 1.00 | 0.10 | 636,532 | 0.35 | 0.38 | 0.10 | ||||||||||||||||||||||||||||||||
Year ended 12/31/15 |
1.00 | 0.00 | 0.00 | 0.00 | (0.00 | ) | 1.00 | 0.01 | 737,858 | 0.21 | 0.51 | 0.01 | ||||||||||||||||||||||||||||||||
Year ended 12/31/14 |
1.00 | 0.00 | 0.00 | 0.00 | (0.00 | ) | 1.00 | 0.01 | 606,553 | 0.16 | 0.50 | 0.01 | ||||||||||||||||||||||||||||||||
Year ended 12/31/13 |
1.00 | 0.00 | (0.00 | ) | 0.00 | (0.00 | ) | 1.00 | 0.03 | 422,491 | 0.16 | 0.70 | 0.03 | |||||||||||||||||||||||||||||||
Series II |
||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/17 |
1.00 | 0.00 | (0.00 | ) | 0.00 | (0.00 | ) | 1.00 | 0.31 | 85,541 | 0.65 | (c) | 0.65 | (c) | 0.31 | (c) | ||||||||||||||||||||||||||||
Year ended 12/31/16 |
1.00 | 0.00 | 0.00 | 0.00 | (0.00 | ) | 1.00 | 0.03 | 97,362 | 0.43 | 0.63 | 0.02 | ||||||||||||||||||||||||||||||||
Year ended 12/31/15 |
1.00 | 0.00 | 0.00 | 0.00 | (0.00 | ) | 1.00 | 0.01 | 23,940 | 0.21 | 0.76 | 0.01 | ||||||||||||||||||||||||||||||||
Year ended 12/31/14 |
1.00 | 0.00 | 0.00 | 0.00 | (0.00 | ) | 1.00 | 0.01 | 17,496 | 0.16 | 0.75 | 0.01 | ||||||||||||||||||||||||||||||||
Year ended 12/31/13 |
1.00 | 0.00 | (0.00 | ) | 0.00 | (0.00 | ) | 1.00 | 0.03 | 15,883 | 0.16 | 0.95 | 0.03 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America. Total returns are not annualized for periods less than one year, if applicable and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns. |
(c) | Ratios are based on average daily net assets (000s omitted) of $623,026 and $91,531 for Series I and Series II shares, respectively. |
Invesco V.I. Government Money Market Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
and Shareholders of Invesco V.I. Government Money Market Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Invesco V.I. Government Money Market Fund (one of the funds constituting AIM Variable Insurance Funds (Invesco Variable Insurance Funds), hereafter referred to as the Fund) as of December 31, 2017, the related statement of operations for the year ended December 31, 2017, the statement of changes in net assets for each of the two years in the period ended December 31, 2017, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2017 (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2017 and the financial highlights for each of the five years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Funds management. Our responsibility is to express an opinion on the Funds financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2017 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, TX
February 14, 2018
We have served as the auditor of one or more of the investment companies in the Invesco/PowerShares group of investment companies since at least 1995. We have not determined the specific year we began serving as auditor.
Invesco V.I. Government Money Market Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period July 1, 2017 through December 31, 2017.
The actual and hypothetical expenses in the examples below do not represent the effect of any fees or other expenses assessed in connection with a variable product; if they did, the expenses shown would be higher while the ending account values shown would be lower.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled Actual Expenses Paid During Period to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Funds actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs. Therefore, the hypothetical information is useful in comparing ongoing costs, and will not help you determine the relative total costs of owning different funds.
Class | Beginning Account Value (07/01/17) |
ACTUAL | HYPOTHETICAL (5% annual return before expenses) |
Annualized Ratio |
||||||||||||||||||||
Ending Account Value |
Expenses Paid During Period2 |
Ending Account Value |
Expenses Paid During |
|||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 1,003.50 | $ | 2.22 | $ | 1,022.99 | $ | 2.24 | 0.44 | % | ||||||||||||
Series II | 1,000.00 | 1,002.20 | 3.48 | 1,021.73 | 3.52 | 0.69 |
1 | The actual ending account value is based on the actual total return of the Fund for the period July 1, 2017 through December 31, 2017, after actual expenses and will differ from the hypothetical ending account value which is based on the Funds expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Funds annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half year. |
Invesco V.I. Government Money Market Fund
Tax Information
Form 1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific states requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended December 31, 2017:
Federal and State Income Tax |
||||
Corporate Dividends Received Deduction* |
0.00 | % | ||
U.S. Treasury Obligations* |
15.62 | % |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Funds fiscal year. |
Invesco V.I. Government Money Market Fund
Trustees and Officers
The address of each trustee and officer is AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Trust), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trusts organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 1960 Trustee | 2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business
Formerly: Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US), Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) |
158 | None | ||||
Philip A. Taylor2 1954 Trustee and Senior Vice President | 2006 | Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco Aim Management Group, Inc.) (financial services holding company); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.) (registered transfer agent); Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company); Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management).
Formerly: Co-Chairman, Co-President and Co-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chief Executive Officer and President, Van Kampen Exchange Corp; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurers Series Trust (Invesco Treasurers Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurers Series Trust (Invesco Treasurers Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) (registered broker dealer); Manager, Invesco PowerShares Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco Aim Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurers Series Trust (Invesco Treasurers Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. |
158 | None |
1 | Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser. |
2 | Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser. |
Invesco V.I. Government Money Market Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Independent Trustees | ||||||||
Bruce L. Crockett 1944 Trustee and Chair |
1993 | Chairman, Crockett Technologies Associates (technology consulting company)
Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute: Member of the Audit Committee, Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council |
158 | Director and Chairman of the Audit Committee, ALPS (Attorneys Liability Protection Society) (insurance company); Director and Member of the Audit Committee and Compensation Committee, Ferroglobe PLC (metallurgical company) | ||||
David C. Arch 1945 Trustee |
2010 | Chairman of Blistex Inc. (consumer health care products manufacturer); Member, World Presidents Organization | 158 | Board member of the Illinois Manufacturers Association | ||||
Jack M. Fields 1952 Trustee |
1997 | Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Chairman, Discovery Learning Alliance (non-profit)
Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff) (human resources provider); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives |
158 | None | ||||
Cynthia Hostetler 1962 Trustee |
2017 | Non-Executive Director and Trustee of a number of public and private business corporations
Formerly: Head of Investment Funds and Private Equity, Overseas Private Investment Corporation; President, First Manhattan Bancorporation, Inc.; Attorney, Simpson Thacher & Bartlett LLP |
158 | Vulcan Materials Company (construction materials company); Trilinc Global Impact Fund; Aberdeen Investment Funds (4 portfolios); Artio Global Investment LLC (mutual fund complex); Edgen Group, Inc. (specialized energy and infrastructure products distributor) | ||||
Eli Jones 1961 Trustee |
2016 | Professor and Dean, Mays Business School Texas A&M University
Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University; Director, Arvest Bank |
158 | Insperity, Inc. (formerly known as Administaff) (human resources provider) | ||||
Prema Mathai-Davis 1950 Trustee |
1998 | Retired. | 158 | None | ||||
Teresa M. Ressel 1962 Trustee |
2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Chief Financial Officer, Olayan America, The Olayan Group (international investor/commercial/industrial); Chief Executive Officer, UBS Securities LLC; Group Chief Operating Officer, Americas, UBS AG; Assistant Secretary for Management & Budget and CFO, US Department of the Treasury |
158 | Atlantic Power Corporation (power generation company); ON Semiconductor Corp. (semiconductor supplier) | ||||
Ann Barnett Stern 1957 Trustee |
2017 | President and Chief Executive Officer, Houston Endowment Inc. (private philanthropic institution)
Formerly: Executive Vice President and General Counsel, Texas Childrens Hospital; Attorney, Beck, Redden and Secrest, LLP; Business Law Instructor, University of St. Thomas; Attorney, Andrews & Kurth LLP |
158 | Federal Reserve Bank of Dallas | ||||
Raymond Stickel, Jr. 1944 Trustee |
2005 | Retired.
Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios); Partner, Deloitte & Touche |
158 | None | ||||
Robert C. Troccoli 1949 Trustee |
2016 | Adjunct Professor, University of Denver Daniels College of Business
Formerly: Senior Partner, KPMG LLP |
158 | None | ||||
Christopher L. Wilson 1957 Trustee | 2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Managing Partner, CT2, LLC (investing and consulting firm); President/Chief Executive Officer, Columbia Funds, Bank of America Corporation; President/Chief Executive Officer, CDC IXIS Asset Management Services, Inc.; Principal & Director of Operations, Scudder Funds, Scudder, Stevens & Clark, Inc.; Assistant Vice President, Fidelity Investments |
158 | TD Asset Management USA Inc. (mutual fund complex) (22 portfolios); ISO New England, Inc. (non-profit organization managing regional electricity market) |
Invesco V.I. Government Money Market Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers | ||||||||
Sheri Morris 1964 President, Principal Executive Officer and Treasurer |
1999 | President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco Aim Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; and Treasurer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust and PowerShares Actively Managed Exchange-Traded Fund Trust |
N/A | N/A | ||||
Russell C. Burk 1958 Senior Vice President and Senior Officer |
2005 | Senior Vice President and Senior Officer, The Invesco Funds | N/A | N/A | ||||
John M. Zerr 1962 Senior Vice President, Chief Legal Officer and Secretary |
2006 | Director, Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Managing Director, Invesco PowerShares Capital Management LLC; Director, Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust; Manager and Secretary, Invesco Indexing LLC
Formerly: Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser); Vice President and Secretary, PBHG Funds (an investment company) and PBHG Insurance Series Fund (an investment company); Chief Operating Officer, General Counsel and Secretary, Old Mutual Investment Partners (a broker-dealer); General Counsel and Secretary, Old Mutual Fund Services (an administrator) and Old Mutual Shareholder Services (a shareholder servicing center); Executive Vice President, General Counsel and Secretary, Old Mutual Capital, Inc. (an investment adviser); and Vice President and Secretary, Old Mutual Advisors Funds (an investment company) |
N/A | N/A | ||||
Gregory G. McGreevey 1962 Senior Vice President |
2012 | Senior Managing Director, Invesco Ltd.; Director, Chairman, President, and Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President, Invesco Management Group, Inc.; Director, Invesco Mortgage Capital, Inc. and Invesco Senior Secured Management, Inc.; and Senior Vice President, The Invesco Funds
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A | ||||
Kelli Gallegos 1970 Vice President, Principal Financial Officer and Assistant Treasurer |
2008 | Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A |
Invesco V.I. Government Money Market Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers(continued) | ||||||||
Tracy Sullivan 1962 Vice President, Chief Tax Officer and Assistant Treasurer |
2008 | Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A | ||||
Crissie M. Wisdom 1969 Anti-Money Laundering Compliance Officer |
2013 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., Invesco Management Group, Inc., The Invesco Funds, and PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp. |
N/A | N/A | ||||
Robert R. Leveille 1969 Chief Compliance Officer |
2016 | Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds
Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds |
N/A | N/A |
The Statement of Additional Information of the Trust includes additional information about the Funds Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Funds Statement of Additional Information for information on the Funds sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 |
Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Auditors PricewaterhouseCoopers LLP 1000 Louisiana Street, Suite 5800 Houston, TX 77002-5678 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2005 Market Street, Suite 2600 Philadelphia, PA 19103-7018 |
Counsel to the Independent Trustees Goodwin Procter LLP 901 New York Avenue, N.W. Washington, D.C. 20001 |
Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Custodian Bank of New York Mellon 2 Hanson Place Brooklyn, NY 11217-1431 |
Invesco V.I. Government Money Market Fund
| ||||
Annual Report to Shareholders
|
December 31, 2017 | |||
| ||||
Invesco V.I. Government Securities Fund
|
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Funds semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The Funds Form N-Q filings are available on the SEC website, sec.gov. Copies of the Funds Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-07452 and 033-57340. The Funds most recent portfolio holdings, as filed on Form N-Q, have also been made available to insurance companies issuing variable annuity contracts and variable life insurance policies (variable products) that invest in the Fund. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/ proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
This report must be accompanied or preceded by a currently effective Fund prospectus and variable product prospectus, which contain more complete information, including sales charges and expenses. Investors should read each carefully before investing.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE | ||
Invesco Distributors, Inc. VIGOV-AR-1 02092018 1209 |
Managements Discussion of Fund Performance
Invesco V.I. Government Securities Fund
Invesco V.I. Government Securities Fund
Your Funds Long-Term Performance
Results of a $10,000 Investment Oldest Share Class(es)
Fund and index data from 12/31/07
1 | Source: FactSet Research Systems Inc. |
2 | Source: Lipper Inc. |
Past performance cannot guarantee
comparable future results.
Invesco V.I. Government Securities Fund
Invesco V.I. Government Securities Funds investment objective is total return, comprised of current income and capital appreciation.
∎ | Unless otherwise stated, information presented in this report is as of December 31, 2017, and is based on total net assets. |
∎ | Unless otherwise noted, all data provided by Invesco. |
Invesco V.I. Government Securities Fund
Invesco V.I. Government Securities Fund
Schedule of Investments
December 31, 2017
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Government Securities Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Government Securities Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Government Securities Fund
Investment Abbreviations:
Notes to Schedule of Investments:
(a) | Interest or dividend rate is redetermined periodically. Rate shown is the rate in effect on December 31, 2017. |
(b) | Interest rate is redetermined periodically based on the cash flows generated by the pool of assets backing the security, less any applicable fees. The rate shown is the rate in effect December 31, 2017. |
(c) | Security traded on a discount basis. The interest rate shown represents the discount rate at the time of purchase by the Fund. |
(d) | All or a portion of the value was pledged and/or designated as collateral to cover margin requirements for open futures contracts and swap agreements. See Note 1J and Note 4. |
(e) | Principal amount of security and interest payments are adjusted for inflation. See Note 1I. |
(f) | Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended (the 1933 Act). The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The aggregate value of these securities at December 31, 2017 was $47,239,666, which represented 8.99% of the Funds Net Assets. |
(g) | The money market fund and the Fund are affiliated by having the same investment adviser. The rate shown is the 7-day SEC standardized yield as of December 31, 2017. |
(h) | The table below details options purchased: See Note 1M: |
Open Over-The-Counter Interest Rate Swaptions Purchased | ||||||||||||||||||||||||||||||||||
Description | Type of Contract |
Counterparty | Exercise Rate |
Pay/Receive Exercise Rate |
Floating Rate Index |
Payment Frequency |
Expiration Date |
Notional Value |
Value | |||||||||||||||||||||||||
10 Year Interest Rate Swap |
Put | Citibank, N.A. | 2.25 | % | Pay | 3 Month USD LIBOR | Quarterly | 03/26/2018 | $ | 5,500,000 | $ | 107,177 | ||||||||||||||||||||||
10 Year Interest Rate Swap |
Put | Morgan Stanley Capital Services LLC |
2.25 | Pay | 3 Month USD LIBOR | Quarterly | 03/26/2018 | 5,500,000 | 107,177 | |||||||||||||||||||||||||
Total Options Purchased Interest Rate Risk (Cost $175,313) |
|
$ | 214,354 |
Open Futures Contracts | ||||||||||||||||||||
Long Futures Contracts | Number of Contracts |
Expiration Month |
Notional Value |
Value | Unrealized Appreciation (Depreciation) |
|||||||||||||||
U.S. Treasury 5 Year Notes |
35 | March2018 | $ | 4,065,742 | $ | (14,576 | ) | $ | (14,576 | ) | ||||||||||
U.S. Treasury 10 Year Notes |
50 | March2018 | 6,202,344 | (12,197 | ) | (12,197 | ) | |||||||||||||
U.S. Treasury Long Bonds |
36 | March2018 | 5,508,000 | (13,023 | ) | (13,023 | ) | |||||||||||||
U.S. Treasury Ultra Bonds |
83 | March2018 | 13,915,469 | 101,834 | 101,834 | |||||||||||||||
Subtotal Long Futures Contracts |
62,038 | 62,038 | ||||||||||||||||||
Short Futures Contracts |
||||||||||||||||||||
U.S. Treasury 2 Year Notes |
88 | March2018 | (18,841,625 | ) | 20,546 | 20,546 | ||||||||||||||
U.S. Treasury 10 Year Ultra Bonds |
77 | March2018 | (10,284,313 | ) | 41,418 | 41,418 | ||||||||||||||
Subtotal Short Futures Contracts |
61,964 | 61,964 | ||||||||||||||||||
Total Futures Contracts Interest Rate Risk |
$ | 124,002 | $ | 124,002 |
Open Centrally Cleared Interest Rate Swap Agreements | ||||||||||||||||||||||||||||||||||||||
Pay/Receive Floating Rate |
Floating Rate Index |
Payment Frequency |
(Pay)/ Receive Fixed Rate |
Payment Frequency |
Maturity Date |
Notional Value |
Upfront Payments Paid (Received) |
Value | Unrealized Appreciation (Depreciation) |
|||||||||||||||||||||||||||||
Pay |
3 Month USD LIBOR | Quarterly | 2.25 | % | Semi-Annually | 03/28/2028 | USD | 2,750,000 | $ | | $ | (39,880 | ) | $ | (39,880 | ) | ||||||||||||||||||||||
Pay |
3 Month USD LIBOR | Quarterly | 2.25 | Semi-Annually | 03/28/2028 | USD | 2,750,000 | | (39,880 | ) | (39,880 | ) | ||||||||||||||||||||||||||
Pay |
3 Month USD LIBOR | Quarterly | 2.37 | Semi-Annually | 03/28/2028 | USD | 1,095,000 | | (4,856 | ) | (4,856 | ) | ||||||||||||||||||||||||||
Pay |
3 Month USD LIBOR | Quarterly | 2.49 | Semi-Annually | 03/28/2028 | USD | 1,042,000 | | 6,289 | 6,289 | ||||||||||||||||||||||||||||
Receive |
3 Month USD LIBOR | Quarterly | (2.34 | ) | Semi-Annually | 03/28/2028 | USD | 1,105,000 | | 7,675 | 7,675 | |||||||||||||||||||||||||||
Total Centrally Cleared Interest Rate Swap Agreements Interest Rate Risk |
|
$ | | $ | (70,652 | ) | $ | (70,652 | ) |
Abbreviations:
LIBOR | London Interbank Offer Rate | |
USD | U.S. Dollar |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Government Securities Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Government Securities Fund
Statement of Changes in Net Assets
For the years ended December 31, 2017 and 2016
2017 | 2016 | |||||||
Operations: |
| |||||||
Net investment income |
$ | 10,356,098 | $ | 11,085,017 | ||||
Net realized gain (loss) |
(86,759 | ) | 1,829,666 | |||||
Change in net unrealized appreciation (depreciation) |
(387,548 | ) | (5,192,977 | ) | ||||
Net increase in net assets resulting from operations |
9,881,791 | 7,721,706 | ||||||
Distributions to shareholders from net investment income: |
| |||||||
Series I |
(7,221,984 | ) | (7,819,357 | ) | ||||
Series ll |
(3,882,382 | ) | (3,787,853 | ) | ||||
Total distributions from net investment income |
(11,104,366 | ) | (11,607,210 | ) | ||||
Share transactionsnet: |
| |||||||
Series l |
(34,554,472 | ) | (37,454,400 | ) | ||||
Series ll |
2,536,879 | 11,482,998 | ||||||
Net increase (decrease) in net assets resulting from share transactions |
(32,017,593 | ) | (25,971,402 | ) | ||||
Net increase (decrease) in net assets |
(33,240,168 | ) | (29,856,906 | ) | ||||
Net assets: |
| |||||||
Beginning of year |
558,624,342 | 588,481,248 | ||||||
End of year (includes undistributed net investment income of $10,040,738 and $10,784,856, respectively) |
$ | 525,384,174 | $ | 558,624,342 |
Notes to Financial Statements
December 31, 2017
NOTE 1Significant Accounting Policies
Invesco V.I. Government Securities Fund (the Fund) is a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Trust). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end series management investment company consisting of twenty-four separate portfolios, (each constituting a Fund). The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each Fund or class will be voted on exclusively by the shareholders of such Fund or class. Current Securities and Exchange Commission (SEC) guidance, however, requires participating insurance companies offering separate accounts to vote shares proportionally in accordance with the instructions of the contract owners whose investments are funded by shares of each Fund or class.
The Funds investment objective is total return, comprised of current income and capital appreciation.
The Fund currently offers two classes of shares, Series I and Series II, both of which are offered to insurance company separate accounts funding variable annuity contracts and variable life insurance policies (variable products).
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946, Financial Services Investment Companies.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations Securities, including restricted securities, are valued according to the following policy. |
Debt obligations (including convertible securities) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual trading characteristics and other market data. Pricing services generally value debt obligations assuming orderly transactions of institutional round lot size, but a fund may hold or transact in the same securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
A security listed or traded on an exchange (except convertible securities) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and asked prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and asked prices. For purposes of determining net asset value (NAV) per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (NYSE).
Invesco V.I. Government Securities Fund
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end-of-day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
Foreign securities (including foreign exchange contracts) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that the investment adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trusts officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/asked quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a securitys fair value.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuers assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
B. | Securities Transactions and Investment Income Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any) is recorded on the accrual basis from settlement date. Bond premiums and discounts are amortized and/or accreted over the lives of the respective securities. Pay-in-kind interest income and non-cash dividend income received in the form of securities in-lieu of cash are recorded at the fair value of the securities received. Paydown gains and losses on mortgage and asset-backed securities are recorded as adjustments to interest income. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Funds net asset value and, accordingly, they reduce the Funds total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and the Statement of Changes in Net Assets, or the net investment income per share and the ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. | Country Determination For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuers securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
D. | Distributions Distributions from net investment income and net realized capital gain, if any, are generally declared and paid to separate accounts of participating insurance companies annually and recorded on the ex-dividend date. |
E. | Federal Income Taxes The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the Internal Revenue Code), necessary to qualify as a regulated investment company and to distribute substantially all of the Funds taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. |
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Funds uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain
Invesco V.I. Government Securities Fund
tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
F. | Expenses Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
G. | Accounting Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
H. | Indemnifications Under the Trusts organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Funds servicing agreements, that contain a variety of indemnification clauses. The Funds maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
I. | Treasury Inflation-Protected Securities The Fund may invest in Treasury Inflation-Protected Securities (TIPS). TIPS are fixed income securities whose principal value is periodically adjusted to the rate of inflation. The principal value of TIPS will be adjusted upward or downward, and any increase or decrease in the principal amount of TIPS will be included as interest income in the Statement of Operations, even though investors do not receive their principal until maturity. |
J. | Futures Contracts The Fund may enter into futures contracts to manage exposure to interest rate, equity and market price movements and/or currency risks. A futures contract is an agreement between two parties (Counterparties) to purchase or sell a specified underlying security, currency or commodity (or delivery of a cash settlement price, in the case of an index future) for a fixed price at a future date. The Fund currently invests only in exchange-traded futures and they are standardized as to maturity date and underlying financial instrument. Initial margin deposits required upon entering into futures contracts are satisfied by the segregation of specific securities or cash as collateral at the futures commission merchant (broker). During the period the futures contracts are open, changes in the value of the contracts are recognized as unrealized gains or losses by recalculating the value of the contracts on a daily basis. Subsequent or variation margin payments are received or made depending upon whether unrealized gains or losses are incurred. These amounts are reflected as receivables or payables on the Statement of Assets and Liabilities. When the contracts are closed or expire, the Fund recognizes a realized gain or loss equal to the difference between the proceeds from, or cost of, the closing transaction and the Funds basis in the contract. The net realized gain (loss) and the change in unrealized gain (loss) on futures contracts held during the period is included on the Statement of Operations. The primary risks associated with futures contracts are market risk and the absence of a liquid secondary market. If the Fund were unable to liquidate a futures contract and/or enter into an offsetting closing transaction, the Fund would continue to be subject to market risk with respect to the value of the contracts and continue to be required to maintain the margin deposits on the futures contracts. Futures contracts have minimal Counterparty risk since the exchanges clearinghouse, as Counterparty to all exchange-traded futures, guarantees the futures against default. Risks may exceed amounts recognized in the Statement of Assets and Liabilities. |
K. | Dollar Rolls and Forward Commitment Transactions The Fund may enter into dollar roll transactions to enhance the Funds performance. The Fund executes its dollar roll transactions in the to be announced (TBA) market whereby the Fund makes a forward commitment to purchase a security and, instead of accepting delivery, the position is offset by the sale of the security with a simultaneous agreement to repurchase at a future date. |
The Fund accounts for dollar roll transactions as purchases and sales and realizes gains and losses on these transactions. These transactions increase the Funds portfolio turnover rate. The Fund will segregate liquid assets in an amount equal to its dollar roll commitments. Dollar roll transactions may be considered borrowings under the 1940 Act.
Dollar roll transactions involve the risk that a Counterparty to the transaction may fail to complete the transaction. If this occurs, the Fund may lose the opportunity to purchase or sell the security at the agreed upon price. Dollar roll transactions also involve the risk that the value of the securities retained by the Fund may decline below the price of the securities that the Fund has sold but is obligated to purchase under the agreement.
L. | Call Options Purchased and Written The Fund may write covered call options and/or buy call options. A covered call option gives the purchaser of such option the right to buy, and the writer the obligation to sell, the underlying security or foreign currency at the stated exercise price during the option period. Options written by the Fund normally will have expiration dates between three and nine months from the date written. The exercise price of a call option may be below, equal to, or above the current market value of the underlying security at the time the option is written. |
Additionally, the Fund may enter into an option on a swap agreement, also called a swaption. A swaption is an option that gives the buyer the right, but not the obligation, to enter into a swap on a future date in exchange for paying a market-based premium. A receiver swaption gives the owner the right to receive the total return of a specified asset, reference rate or index. Swaptions also include options that allow an existing swap to be terminated or extended by one of the Counterparties.
When the Fund writes a covered call option, an amount equal to the premium received by the Fund is recorded as an asset and an equivalent liability in the Statement of Assets and Liabilities. The amount of the liability is subsequently marked-to-market to reflect the current market value of the option written. If a written covered call option expires on the stipulated expiration date, or if the Fund enters into a closing purchase transaction, the Fund realizes a gain (or a loss if the closing purchase transaction exceeds the premium received when the option was written) without regard to any unrealized gain or loss on the underlying security, and the liability related to such option is extinguished. If a written covered call option is exercised, the Fund realizes a gain or a loss from the sale of the underlying security and the proceeds of the sale are increased by the premium originally received. Realized and unrealized gains and losses on call options written are included in the Statement of
Invesco V.I. Government Securities Fund
Operations as Net realized gain (loss) from and Change in net unrealized appreciation (depreciation) of Option contracts written. A risk in writing a covered call option is that the Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised.
When the Fund buys a call option, an amount equal to the premium paid by the Fund is recorded as an investment on the Statement of Assets and Liabilities. The amount of the investment is subsequently marked-to-market to reflect the current value of the option purchased. Realized and unrealized gains and losses on call options purchased are included in the Statement of Operations as Net realized gain (loss) from and Change in net unrealized appreciation (depreciation) of Investment securities. A risk in buying an option is that the Fund pays a premium whether or not the option is exercised. In addition, there can be no assurance that a liquid secondary market will exist for any option purchased.
M. | Put Options Purchased and Written The Fund may purchase and write put options including options on securities indexes, or foreign currency and/or futures contracts. By purchasing a put option, the Fund obtains the right (but not the obligation) to sell the options underlying instrument at a fixed strike price. In return for this right, the Fund pays an option premium. The options underlying instrument may be a security, securities index, or a futures contract. Put options may be used by the Fund to hedge securities it owns by locking in a minimum price at which the Fund can sell. If security prices fall, the put option could be exercised to offset all or a portion of the Funds resulting losses. At the same time, because the maximum the Fund has at risk is the cost of the option, purchasing put options does not eliminate the potential for the Fund to profit from an increase in the value of the underlying portfolio securities. The Fund may write put options to earn additional income in the form of option premiums if it expects the price of the underlying instrument to remain stable or rise during the option period so that the option will not be exercised. The risk in this strategy is that the price of the underlying securities may decline by an amount greater than the premium received. Put options written are reported as a liability in the Statement of Assets and Liabilities. Realized and unrealized gains and losses on put options purchased and put options written are included in the Statement of Operations as Net realized gain (loss) from and Change in net unrealized appreciation (depreciation) of Investment securities and Option contracts written, respectively. A risk in buying an option is that the Fund pays a premium whether or not the option is exercised. In addition, there can be no assurance that a liquid secondary market will exist for any option purchased. |
N. | Swap Agreements The Fund may enter into various swap transactions, including interest rate, total return, index, currency and credit default swap contracts (CDS) for investment purposes or to manage interest rate, currency or credit risk. Such transactions are agreements between Counterparties. A swap agreement may be negotiated bilaterally and traded over-the-counter (OTC) between two parties (uncleared/OTC) or, in some instances, must be transacted through a future commission merchant (FCM) and cleared through a clearinghouse that serves as a central Counterparty (centrally cleared swap). These agreements may contain among other conditions, events of default and termination events, and various covenants and representations such as provisions that require the Fund to maintain a pre-determined level of net assets, and/or provide limits regarding the decline of the Funds NAV over specific periods of time. If the Fund were to trigger such provisions and have open derivative positions at that time, the Counterparty may be able to terminate such agreement and request immediate payment in an amount equal to the net liability positions, if any. |
Interest rate, total return, index, and currency swap agreements are two-party contracts entered into primarily to exchange the returns (or differentials in rates of returns) earned or realized on particular predetermined investments or instruments. The gross returns to be exchanged or swapped between the parties are calculated with respect to a notional amount, i.e., the return on or increase in value of a particular dollar amount invested at a particular interest rate or return of an underlying asset, in a particular foreign currency, or in a basket of securities representing a particular index.
In a centrally cleared swap, the Funds ultimate Counterparty is a central clearinghouse. The Fund initially will enter into centrally cleared swaps through an executing broker. When a fund enters into a centrally cleared swap, it must deliver to the central Counterparty (via the FCM) an amount referred to as initial margin. Initial margin requirements are determined by the central Counterparty, but an FCM may require additional initial margin above the amount required by the central Counterparty. Initial margin deposits required upon entering into centrally cleared swaps are satisfied by cash or securities as collateral at the FCM. Securities deposited as initial margin are designated on the Schedule of Investments and cash deposited is recorded on the Statement of Assets and Liabilities. During the term of a cleared swap agreement, a variation margin amount may be required to be paid by the Fund or may be received by the Fund, based on the daily change in price of the underlying reference instrument subject to the swap agreement and is recorded as a receivable or payable for variation margin in the Statement of Assets and Liabilities until the centrally cleared swap is terminated at which time a realized gain or loss is recorded.
An interest rate swap is an agreement between Counterparties pursuant to which the parties exchange a floating rate payment for a fixed rate payment based on a specified notional amount.
Changes in the value of centrally cleared and OTC swap agreements are recognized as unrealized gains (losses) in the Statement of Operations by marking to market on a daily basis to reflect the value of the swap agreement at the end of each trading day. Payments received or paid at the beginning of the agreement are reflected as such on the Statement of Assets and Liabilities and may be referred to as upfront payments. The Fund accrues for the fixed payment stream and amortizes upfront payments, if any, on swap agreements on a daily basis with the net amount, recorded as a component of realized gain (loss) on the Statement of Operations. A liquidation payment received or made at the termination of a swap agreement is recorded as realized gain (loss) on the Statement of Operations. The Fund segregates cash or liquid securities having a value at least equal to the amount of the potential obligation of a Fund under any swap transaction. Cash held as collateral is recorded as deposits with brokers on the Statement of Assets and Liabilities. Entering into these agreements involves, to varying degrees, lack of liquidity and elements of credit, market, and Counterparty risk in excess of amounts recognized on the Statement of Assets and Liabilities. Such risks involve the possibility that a swap is difficult to sell or liquidate; the Counterparty does not honor its obligations under the agreement and unfavorable interest rates and market fluctuations. It is possible that developments in the swaps market, including potential government regulation, could adversely affect the Funds ability to terminate existing swap agreements or to realize amounts to be received under such agreements. A short position in a security poses more risk than holding the same security long. As there is no limit on how much the price of the security can increase, the Funds exposure is unlimited.
O. | Other Risks The Fund may invest in obligations issued by agencies and instrumentalities of the U.S. Government that may vary in the level of support they receive from the government. The government may choose not to provide financial support to government sponsored agencies or instrumentalities if it is not legally obligated to do so. In this case, if the issuer defaulted, the Fund may not be able to recover its investment in such issuer from the U.S. Government. Many securities purchased by the Fund are not guaranteed by the U.S. Government. |
Invesco V.I. Government Securities Fund
P. | Leverage Risk Leverage exists when the Fund can lose more than it originally invests because it purchases or sells an instrument or enters into a transaction without investing an amount equal to the full economic exposure of the instrument or transaction. |
Q. | Collateral To the extent the Fund has designated or segregated a security as collateral and that security is subsequently sold, it is the Funds practice to replace such collateral no later than the next business day. |
NOTE 2Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the Adviser or Invesco). Under the terms of the investment advisory agreement, the Fund accrues daily and pays monthly an advisory fee to the Adviser based on the annual rate of the Funds average daily net assets as follows:
Average Daily Net Assets | Rate | |||
First $250 million |
0.50% | |||
Over $250 million |
0.45% |
For the year ended December 31, 2017, the effective advisory fees incurred by the Fund was 0.47%.
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. and separate sub-advisory agreements with Invesco PowerShares Capital Management LLC and Invesco Asset Management (India) Private Limited (collectively, the Affiliated Sub-Advisers) the Adviser, not the Fund, will pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2018, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waivers and/or expense reimbursements (excluding certain items discussed below) of Series I shares to 1.50% and Series II shares to 1.75% of average daily net assets (the expense limits). In determining the Advisers obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waivers and/or expense reimbursements to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on June 30, 2018. During its term, the fee waiver agreement cannot be terminated or amended to increase the expense limits or reduce the advisory fee waiver without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
Further, the Adviser has contractually agreed, through at least June 30, 2019, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the year ended December 31, 2017, the Adviser waived advisory fees of $7,917.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco a fee for costs incurred in providing accounting services and fund administrative services to the Fund and to reimburse Invesco for fees paid to insurance companies that have agreed to provide certain administrative services to the Fund. These administrative services provided by the insurance companies may include, among other things: maintenance of master accounts with the Fund; tracking, recording and transmitting net purchase and redemption orders for Fund shares; maintaining and preserving records related to the purchase, redemption and other account activity of variable product owners; distributing copies of Fund documents such as prospectuses, proxy materials and periodic reports, to variable product owners, and responding to inquiries from variable product owners about the Fund. Pursuant to such agreement, for the year ended December 31, 2017, Invesco was paid $131,893 for accounting and fund administrative services and was reimbursed $825,966 for fees paid to insurance companies.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (IIS) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. For the year ended December 31, 2017, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
The Trust has entered into a master distribution agreement with Invesco Distributors, Inc. (IDI) to serve as the distributor for the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Funds Series II shares (the Plan). The Fund, pursuant to the Plan, pays IDI compensation at the annual rate of 0.25% of the Funds average daily net assets of Series II shares. The fees are accrued daily and paid monthly. Of the Plan payments, up to 0.25% of the average daily net assets of the Series II shares may be paid to insurance companies who furnish continuing personal shareholder services to customers who purchase and own Series II shares of the Fund. For the year ended December 31, 2017, expenses incurred under the Plan are detailed in the Statement of Operations as Distribution fees.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
NOTE 3Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investments assigned level:
Level 1 | Prices are determined using quoted prices in an active market for identical assets. |
Level 2 | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Invesco V.I. Government Securities Fund
Level 3 | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Funds own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of December 31, 2017. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
The Funds policy is to recognize transfers in and out of the valuation levels as of the end of the reporting period. During the year ended December 31, 2017, there were no material transfers between valuation levels.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Investments in Securities |
||||||||||||||||
U.S. Government Sponsored Agency Mortgaged-Backed Securities |
$ | | $ | 232,424,397 | $ | | $ | 232,424,397 | ||||||||
U.S. Treasury Securities |
| 202,580,615 | | 202,580,615 | ||||||||||||
Non-U.S. Government Sponsored Agency Securities |
| 72,294,931 | | 72,294,931 | ||||||||||||
U.S. Government Sponsored Agency Securities |
| 11,214,890 | | 11,214,890 | ||||||||||||
Money Market Funds |
4,639,480 | | | 4,639,480 | ||||||||||||
Options Purchased |
| 214,354 | | 214,354 | ||||||||||||
Total Investments in Securities |
4,639,480 | 518,729,187 | | 523,368,667 | ||||||||||||
Other Investments Assets* |
||||||||||||||||
Futures Contracts |
163,798 | | | 163,798 | ||||||||||||
Swap Agreements |
| 13,964 | | 13,964 | ||||||||||||
163,798 | 13,964 | | 177,762 | |||||||||||||
Other Investments Liabilities* |
||||||||||||||||
Futures Contracts |
(39,796 | ) | | | (39,796 | ) | ||||||||||
Swap Agreements |
| (84,616 | ) | | (84,616 | ) | ||||||||||
(39,796 | ) | (84,616 | ) | | (124,412 | ) | ||||||||||
Total Other Investments |
124,002 | (70,652 | ) | | 53,350 | |||||||||||
Total Investments |
$ | 4,763,482 | $ | 518,658,535 | $ | | $ | 523,422,017 |
* | Unrealized appreciation (depreciation). |
NOTE 4Derivative Investments
The Fund may enter into an International Swaps and Derivatives Association Master Agreement (ISDA Master Agreement) under which a fund may trade OTC derivatives. An OTC transaction entered into under an ISDA Master Agreement typically involves a collateral posting arrangement, payment netting provisions and close-out netting provisions. These netting provisions allow for reduction of credit risk through netting of contractual obligations. The enforceability of the netting provisions of the ISDA Master Agreement depends on the governing law of the ISDA Master Agreement, among other factors.
For financial reporting purposes, the Fund does not offset OTC derivative assets or liabilities that are subject to ISDA Master Agreements in the Statement of Assets and Liabilities.
Value of Derivative Investments at Period-End
The table below summarizes the value of the Funds derivative investments, detailed by primary risk exposure, held as of December 31, 2017:
Value | ||||
Derivative Assets | Interest Rate Risk |
|||
Unrealized appreciation on futures contracts Exchange-Traded(a) |
$ | 163,798 | ||
Unrealized appreciation on swap agreements Centrally Cleared(a) |
13,964 | |||
Options purchased, at value OTC(b) |
214,354 | |||
Total Derivative Assets |
392,116 | |||
Derivatives not subject to master netting agreements |
(177,762 | ) | ||
Total Derivative Assets subject to master netting agreements |
$ | 214,354 |
Value | ||||
Derivative Liabilities | Interest Rate Risk |
|||
Unrealized depreciation on futures contracts Exchange-Traded(a) |
$ | (39,796 | ) | |
Unrealized depreciation on swap agreements Centrally Cleared(a) |
(84,616 | ) | ||
Total Derivative Liabilities |
(124,412 | ) | ||
Derivatives not subject to master netting agreements |
124,412 | |||
Total Derivative Liabilities subject to master netting agreements |
$ | |
(a) | The daily variation margin receivable (payable) at period-end is recorded in the Statement of Assets and Liabilities. |
(b) | Options purchased, at value as reported in the Schedule of Investments. |
Invesco V.I. Government Securities Fund
Offsetting Assets and Liabilities
The table below reflects the Funds exposure to Counterparties subject to either an ISDA Master Agreement or other agreement for OTC derivative transactions as of December 31, 2017.
Financial Derivative Assets |
Net Value of Derivatives |
Collateral (Received)/Pledged |
Net Amount |
|||||||||||||||||
Counterparty | Options Purchased |
Non-Cash | Cash | |||||||||||||||||
Citibank, N.A. |
$ | 107,177 | $ | 107,177 | $ | | $ | | $ | 107,177 | ||||||||||
Morgan Stanley Capital Services LLC |
107,177 | 107,177 | | | 107,177 | |||||||||||||||
Total |
$ | 214,354 | $ | 214,354 | $ | | $ | | $ | 214,354 |
Effect of Derivative Investments for the year ended December 31, 2017
The table below summarizes the gains (losses) on derivative investments, detailed by primary risk exposure, recognized in earnings during the period:
Location of Gain (Loss) on Statement of Operations |
||||
Interest Rate Risk |
||||
Realized Gain (Loss): |
||||
Futures contracts |
$ | 2,590,336 | ||
Options purchased(a) |
(295,000 | ) | ||
Swap agreements |
(236 | ) | ||
Change in Net Unrealized Appreciation (Depreciation): |
||||
Futures contracts |
146,504 | |||
Options purchased(a) |
137,898 | |||
Swap agreements |
(70,652 | ) | ||
Total |
$ | 2,508,850 |
(a) | Options purchased are included in the net realized gain (loss) from investment securities and the change in net unrealized appreciation (depreciation) of investment securities. |
The table below summarizes the twelve-month average notional value of futures contracts, eight-month average notional value of options purchased and four-month average notional value of swap agreements outstanding during the period.
Futures Contracts |
Options Purchased |
Swap Agreements |
||||||||||
Average notional value |
$ | 135,602,595 | $ | 9,812,500 | $ | 7,655,250 |
NOTE 5Trustees and Officers Fees and Benefits
Trustees and Officers Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees and Officers Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees were eligible to participate in a retirement plan that provided for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees and Officers Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 6Cash Balances
The Fund may borrow for leveraging in an amount up to 5% of the Funds total assets (excluding the amount borrowed) at the time the borrowing is made. In doing so, the Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate. The Fund may not purchase additional securities when any borrowings from banks exceed 5% of the Funds total assets.
Invesco V.I. Government Securities Fund
NOTE 7Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended December 31, 2017 and 2016:
2017 | 2016 | |||||||
Ordinary income |
$ | 11,104,366 | $ | 11,607,210 |
Tax Components of Net Assets at Period-End:
2017 | ||||
Undistributed ordinary income |
$ | 10,276,681 | ||
Net unrealized appreciation investments |
2,991,120 | |||
Temporary book/tax differences |
(235,943 | ) | ||
Capital loss carryforward |
(15,270,867 | ) | ||
Shares of beneficial interest |
527,623,183 | |||
Total net assets |
$ | 525,384,174 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Funds net unrealized appreciation difference is attributable primarily to futures contracts and wash sales.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Funds temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund has a capital loss carryforward as of December 31, 2017, which expires as follows:
Capital Loss Carryforward* | ||||||||||||
Expiration | Short-Term | Long-Term | Total | |||||||||
Not subject to expiration |
$ | 8,472,407 | $ | 6,798,460 | $ | 15,270,867 |
* | Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code and may be further limited depending upon a variety of factors, including the realization of net unrealized gains or losses as of the date of any reorganization. |
NOTE 8Investment Transactions
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended December 31, 2017 was $55,621,786 and $90,177,509, respectively. During the same period, purchases and sales of U.S. Treasury obligations were $129,827,009 and $96,886,807, respectively. Cost of investments, including any derivatives, on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investments on a Tax Basis | ||||
Aggregate unrealized appreciation of investments |
$ | 6,506,766 | ||
Aggregate unrealized (depreciation) of investments |
(3,515,646 | ) | ||
Net unrealized appreciation of investments |
$ | 2,991,120 |
Cost of investments for tax purposes is $520,430,897.
NOTE 9Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of expiration of capital loss carryforward, on December 31, 2017, undistributed net investment income was increased by $4,150, undistributed net realized gain (loss) was increased by $3,841,689 and shares of beneficial interest was decreased by $3,845,839. This reclassification had no effect on the net assets of the Fund.
Invesco V.I. Government Securities Fund
NOTE 10Share Information
Summary of Share Activity | ||||||||||||||||
Years ended December 31, | ||||||||||||||||
2017(a) | 2016 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: |
||||||||||||||||
Series I |
4,245,551 | $ | 49,001,619 | 5,588,689 | $ | 65,831,931 | ||||||||||
Series II |
1,931,968 | 22,005,900 | 3,992,862 | 46,492,943 | ||||||||||||
Issued as reinvestment of dividends: |
||||||||||||||||
Series I |
632,952 | 7,221,984 | 666,044 | 7,819,357 | ||||||||||||
Series II |
343,270 | 3,882,382 | 325,417 | 3,787,853 | ||||||||||||
Reacquired: |
||||||||||||||||
Series I |
(7,906,368 | ) | (90,778,075 | ) | (9,454,799 | ) | (111,105,688 | ) | ||||||||
Series II |
(2,048,051 | ) | (23,351,403 | ) | (3,337,612 | ) | (38,797,798 | ) | ||||||||
Net increase (decrease) in share activity |
(2,800,678 | ) | $ | (32,017,593 | ) | (2,219,399 | ) | $ | (25,971,402 | ) |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 79% of the outstanding shares of the Fund. The Fund and the Funds principal underwriter or adviser, are parties to participation agreements with these entities whereby these entities sell units of interest in separate accounts funding variable products that are invested in the Fund. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
NOTE 11Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Net asset value, beginning of period |
Net investment income(a) |
Net gains (losses) on securities (both realized and unrealized) |
Total from investment operations |
Dividends from net investment income |
Net asset value, end of period |
Total return(b) |
Net assets, end of period (000s omitted) |
Ratio
of expenses to average net assets with fee waivers and/or expenses absorbed |
Ratio
of expenses to average net assets without fee waivers and/or expenses absorbed |
Ratio of net investment income to average net assets |
Portfolio turnover(c) |
|||||||||||||||||||||||||||||||||||||
Series I |
| |||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/17 |
$ | 11.44 | $ | 0.22 | $ | (0.01 | ) | $ | 0.21 | $ | (0.24 | ) | $ | 11.41 | 1.87 | % | $ | 318,298 | 0.70 | %(d) | 0.70 | %(d) | 1.97 | %(d) | 35 | % | ||||||||||||||||||||||
Year ended 12/31/16 |
11.52 | 0.23 | (0.07 | ) | 0.16 | (0.24 | ) | 11.44 | 1.32 | 353,614 | 0.73 | 0.73 | 1.93 | 31 | ||||||||||||||||||||||||||||||||||
Year ended 12/31/15 |
11.74 | 0.17 | (0.13 | ) | 0.04 | (0.26 | ) | 11.52 | 0.34 | 393,090 | 0.77 | 0.77 | 1.44 | 59 | ||||||||||||||||||||||||||||||||||
Year ended 12/31/14 |
11.64 | 0.16 | 0.32 | 0.48 | (0.38 | ) | 11.74 | 4.14 | 474,556 | 0.78 | 0.78 | 1.36 | 55 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/13 |
12.40 | 0.13 | (0.45 | ) | (0.32 | ) | (0.44 | ) | 11.64 | (2.62 | ) | 565,690 | 0.74 | 0.76 | 1.10 | 139 | ||||||||||||||||||||||||||||||||
Series II |
||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/17 |
11.33 | 0.19 | (0.00 | ) | 0.19 | (0.21 | ) | 11.31 | 1.72 | 207,086 | 0.95 | (d) | 0.95 | (d) | 1.72 | (d) | 35 | |||||||||||||||||||||||||||||||
Year ended 12/31/16 |
11.42 | 0.20 | (0.08 | ) | 0.12 | (0.21 | ) | 11.33 | 1.00 | 205,010 | 0.98 | 0.98 | 1.68 | 31 | ||||||||||||||||||||||||||||||||||
Year ended 12/31/15 |
11.64 | 0.14 | (0.13 | ) | 0.01 | (0.23 | ) | 11.42 | 0.06 | 195,392 | 1.02 | 1.02 | 1.19 | 59 | ||||||||||||||||||||||||||||||||||
Year ended 12/31/14 |
11.54 | 0.13 | 0.31 | 0.44 | (0.34 | ) | 11.64 | 3.88 | 212,788 | 1.03 | 1.03 | 1.11 | 55 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/13 |
12.29 | 0.10 | (0.45 | ) | (0.35 | ) | (0.40 | ) | 11.54 | (2.85 | ) | 227,237 | 0.99 | 1.01 | 0.85 | 139 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year, if applicable, and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns. |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. |
(d) | Ratios are based on average daily net assets (000s omitted) of $343,537 and $208,171 for Series I and Series II shares, respectively. |
Invesco V.I. Government Securities Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
and Shareholders of Invesco V.I. Government Securities Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Invesco V.I. Government Securities Fund (one of the funds constituting AIM Variable Insurance Funds (Invesco Variable Insurance Funds), hereafter referred to as the Fund) as of December 31, 2017, the related statement of operations for the year ended December 31, 2017, the statement of changes in net assets for each of the two years in the period ended December 31, 2017, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2017 (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2017 and the financial highlights for each of the five years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Funds management. Our responsibility is to express an opinion on the Funds financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2017 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, TX
February 14, 2018
We have served as the auditor of one or more of the investment companies in the Invesco/PowerShares group of investment companies since at least 1995. We have not determined the specific year we began serving as auditor.
Invesco V.I. Government Securities Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period July 1, 2017 through December 31, 2017.
The actual and hypothetical expenses in the examples below do not represent the effect of any fees or other expenses assessed in connection with a variable product; if they did, the expenses shown would be higher while the ending account values shown would be lower.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled Actual Expenses Paid During Period to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Funds actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs. Therefore, the hypothetical information is useful in comparing ongoing costs, and will not help you determine the relative total costs of owning different funds.
Class | Beginning Account Value (07/01/17) |
ACTUAL | HYPOTHETICAL expenses) |
Annualized Expense Ratio |
||||||||||||||||||||
Ending Account Value (12/31/17)1 |
Expenses Paid During Period2 |
Ending Account Value (12/31/17) |
Expenses Paid During Period2 |
|||||||||||||||||||||
Series I |
$ | 1,000.00 | $ | 1,005.50 | $ | 3.49 | $ | 1,021.73 | $ | 3.52 | 0.69 | % | ||||||||||||
Series II |
1,000.00 | 1,004.80 | 4.75 | 1,020.47 | 4.79 | 0.94 |
1 | The actual ending account value is based on the actual total return of the Fund for the period July 1, 2017 through December 31, 2017, after actual expenses and will differ from the hypothetical ending account value which is based on the Funds expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Funds annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half year. |
Invesco V.I. Government Securities Fund
Tax Information
Form 1099-DIV, Form 1042-S and other yearend tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific states requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended December 31, 2017:
Federal and State Income Tax |
||||
Corporate Dividends Received Deduction* |
0.00 | % | ||
U.S. Treasury Obligations* |
24.79 | % |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Funds fiscal year. |
Invesco V.I. Government Securities Fund
Trustees and Officers
The address of each trustee and officer is AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Trust), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trusts organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 1960 Trustee |
2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business
Formerly: Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US), Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) |
158 | None | ||||
Philip A. Taylor2 1954 Trustee and Senior Vice President |
2006 | Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco Aim Management Group, Inc.) (financial services holding company); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.) (registered transfer agent); Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company); Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management).
Formerly: Co-Chairman, Co-President and Co-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chief Executive Officer and President, Van Kampen Exchange Corp; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurers Series Trust (Invesco Treasurers Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurers Series Trust (Invesco Treasurers Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) (registered broker dealer); Manager, Invesco PowerShares Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco Aim Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurers Series Trust (Invesco Treasurers Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. |
158 | None |
1 | Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser. |
2 | Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser. |
Invesco V.I. Government Securities Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Independent Trustees | ||||||||
Bruce L. Crockett 1944 Trustee and Chair |
1993 | Chairman, Crockett Technologies Associates (technology consulting company)
Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute: Member of the Audit Committee, Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council |
158 | Director and Chairman of the Audit Committee, ALPS (Attorneys Liability Protection Society) (insurance company); Director and Member of the Audit Committee and Compensation Committee, Ferroglobe PLC (metallurgical company) | ||||
David C. Arch 1945 Trustee |
2010 | Chairman of Blistex Inc. (consumer health care products manufacturer); Member, World Presidents Organization | 158 | Board member of the Illinois Manufacturers Association | ||||
Jack M. Fields 1952 Trustee |
1997 | Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Chairman, Discovery Learning Alliance (non-profit)
Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff) (human resources provider); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives |
158 | None | ||||
Cynthia Hostetler 1962 Trustee |
2017 | Non-Executive Director and Trustee of a number of public and private business corporations
Formerly: Head of Investment Funds and Private Equity, Overseas Private Investment Corporation; President, First Manhattan Bancorporation, Inc.; Attorney, Simpson Thacher & Bartlett LLP |
158 | Vulcan Materials Company (construction materials company); Trilinc Global Impact Fund; Aberdeen Investment Funds (4 portfolios); Artio Global Investment LLC (mutual fund complex); Edgen Group, Inc. (specialized energy and infrastructure products distributor) | ||||
Eli Jones 1961 Trustee |
2016 | Professor and Dean, Mays Business School Texas A&M University
Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University; Director, Arvest Bank |
158 | Insperity, Inc. (formerly known as Administaff) (human resources provider) | ||||
Prema Mathai-Davis 1950 Trustee |
1998 | Retired. | 158 | None | ||||
Teresa M. Ressel 1962 Trustee |
2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Chief Financial Officer, Olayan America, The Olayan Group (international investor/commercial/industrial); Chief Executive Officer, UBS Securities LLC; Group Chief Operating Officer, Americas, UBS AG; Assistant Secretary for Management & Budget and CFO, US Department of the Treasury |
158 | Atlantic Power Corporation (power generation company); ON Semiconductor Corp. (semiconductor supplier) | ||||
Ann Barnett Stern 1957 Trustee |
2017 | President and Chief Executive Officer, Houston Endowment Inc. (private philanthropic institution)
Formerly: Executive Vice President and General Counsel, Texas Childrens Hospital; Attorney, Beck, Redden and Secrest, LLP; Business Law Instructor, University of St. Thomas; Attorney, Andrews & Kurth LLP |
158 | Federal Reserve Bank of Dallas | ||||
Raymond Stickel, Jr. 1944 Trustee |
2005 | Retired.
Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios); Partner, Deloitte & Touche |
158 | None | ||||
Robert C. Troccoli 1949 Trustee |
2016 | Adjunct Professor, University of Denver Daniels College of Business
Formerly: Senior Partner, KPMG LLP |
158 | None | ||||
Christopher L. Wilson 1957 Trustee |
2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Managing Partner, CT2, LLC (investing and consulting firm); President/Chief Executive Officer, Columbia Funds, Bank of America Corporation; President/Chief Executive Officer, CDC IXIS Asset Management Services, Inc.; Principal & Director of Operations, Scudder Funds, Scudder, Stevens & Clark, Inc.; Assistant Vice President, Fidelity Investments |
158 | TD Asset Management USA Inc. (mutual fund complex) (22 portfolios); ISO New England, Inc. (non-profit organization managing regional electricity market) |
Invesco V.I. Government Securities Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers | ||||||||
Sheri Morris 1964 President, Principal Executive Officer and Treasurer |
1999 | President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco Aim Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; and Treasurer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust and PowerShares Actively Managed Exchange-Traded Fund Trust |
N/A | N/A | ||||
Russell C. Burk 1958 Senior Vice President and Senior Officer |
2005 | Senior Vice President and Senior Officer, The Invesco Funds | N/A | N/A | ||||
John M. Zerr 1962 Senior Vice President, Chief Legal Officer and Secretary |
2006 | Director, Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Managing Director, Invesco PowerShares Capital Management LLC; Director, Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust; Manager and Secretary, Invesco Indexing LLC
Formerly: Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser); Vice President and Secretary, PBHG Funds (an investment company) and PBHG Insurance Series Fund (an investment company); Chief Operating Officer, General Counsel and Secretary, Old Mutual Investment Partners (a broker-dealer); General Counsel and Secretary, Old Mutual Fund Services (an administrator) and Old Mutual Shareholder Services (a shareholder servicing center); Executive Vice President, General Counsel and Secretary, Old Mutual Capital, Inc. (an investment adviser); and Vice President and Secretary, Old Mutual Advisors Funds (an investment company) |
N/A | N/A | ||||
Gregory G. McGreevey 1962 Senior Vice President |
2012 | Senior Managing Director, Invesco Ltd.; Director, Chairman, President, and Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President, Invesco Management Group, Inc.; Director, Invesco Mortgage Capital, Inc. and Invesco Senior Secured Management, Inc.; and Senior Vice President, The Invesco Funds
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A | ||||
Kelli Gallegos 1970 Vice President, Principal Financial Officer and Assistant Treasurer |
2008 | Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A |
Invesco V.I. Government Securities Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers(continued) | ||||||||
Tracy Sullivan 1962 Vice President, Chief Tax Officer and Assistant Treasurer |
2008 | Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A | ||||
Crissie M. Wisdom 1969 Anti-Money Laundering Compliance Officer |
2013 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., Invesco Management Group, Inc., The Invesco Funds, and PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp. |
N/A | N/A | ||||
Robert R. Leveille 1969 Chief Compliance Officer |
2016 | Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds
Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds |
N/A | N/A |
The Statement of Additional Information of the Trust includes additional information about the Funds Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Funds Statement of Additional Information for information on the Funds sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 |
Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Auditors PricewaterhouseCoopers LLP 1000 Louisiana Street, Suite 5800 Houston, TX 77002-5678 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2005 Market Street, Suite 2600 Philadelphia, PA 19103-7018 |
Counsel to the Independent Trustees Goodwin Procter LLP 901 New York Avenue, N.W. Washington, D.C. 20001 |
Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
Invesco V.I. Government Securities Fund
| ||||
Annual Report to Shareholders
|
December 31, 2017 | |||
| ||||
Invesco V.I. Growth and Income Fund
|
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Funds semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The Funds Form N-Q filings are available on the SEC website, sec.gov. Copies of the Funds Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-07452 and 033-57340. The Funds most recent portfolio holdings, as filed on Form N-Q, have also been made available to insurance companies issuing variable annuity contracts and variable life insurance policies (variable products) that invest in the Fund. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/ proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
This report must be accompanied or preceded by a currently effective Fund prospectus and variable product prospectus, which contain more complete information, including sales charges and expenses. Investors should read each carefully before investing.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE | ||
Invesco Distributors, Inc. VK-VIGRI-AR-1 02132018 1136 |
Managements Discussion of Fund Performance
Invesco V.I. Growth and Income Fund
Invesco V.I. Growth and Income Fund
Your Funds Long-Term Performance
Results of a $10,000 Investment Oldest Share Class(es)
Fund and index data from 12/31/07
1 | Source: FactSet Research Systems Inc. |
2 | Source: Lipper Inc. |
Past performance cannot guarantee
comparable future results.
Invesco V.I. Growth and Income Fund
Invesco V.I. Growth and Income Funds investment objective is to seek long-term growth of capital and income.
∎ | Unless otherwise stated, information presented in this report is as of December 31, 2017, and is based on total net assets. |
∎ | Unless otherwise noted, all data provided by Invesco. |
Invesco V.I. Growth and Income Fund
Invesco V.I. Growth and Income Fund
Schedule of Investments(a)
December 31, 2017
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Growth and Income Fund
Investment Abbreviations:
ADR | American Depositary Receipt |
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poors. |
(b) | Non-income producing security. |
(c) | The money market fund and the Fund are affiliated by having the same investment adviser. The rate shown is the 7-day SEC standardized yield as of December 31, 2017. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Growth and Income Fund
Open Forward Foreign Currency Contracts | ||||||||||||||||||||||
Settlement |
Counterparty | Contract to | Unrealized Appreciation (Depreciation) |
|||||||||||||||||||
Deliver |
Receive |
|||||||||||||||||||||
01/19/2018 |
State Street Bank and Trust Co. | USD | 88,990 | AUD | 116,034 | $ | 1,545 | |||||||||||||||
01/19/2018 |
State Street Bank and Trust Co. | USD | 208,599 | CAD | 268,209 | 4,860 | ||||||||||||||||
01/19/2018 |
State Street Bank and Trust Co. | USD | 153,075 | CHF | 150,254 | 1,384 | ||||||||||||||||
01/19/2018 |
State Street Bank and Trust Co. | USD | 269,191 | EUR | 226,929 | 3,442 | ||||||||||||||||
01/19/2018 |
State Street Bank and Trust Co. | USD | 270,111 | GBP | 201,255 | 1,807 | ||||||||||||||||
Subtotal |
|
13,038 | ||||||||||||||||||||
01/19/2018 |
Bank of New York Mellon (The) | AUD | 7,360,405 | USD | 5,560,786 | (182,137 | ) | |||||||||||||||
01/19/2018 |
Bank of New York Mellon (The) | CAD | 17,768,593 | USD | 13,806,211 | (335,275 | ) | |||||||||||||||
01/19/2018 |
Bank of New York Mellon (The) | CHF | 9,624,714 | USD | 9,726,845 | (167,252 | ) | |||||||||||||||
01/19/2018 |
Bank of New York Mellon (The) | EUR | 14,749,896 | USD | 17,365,052 | (355,434 | ) | |||||||||||||||
01/19/2018 |
Bank of New York Mellon (The) | GBP | 23,513,987 | USD | 31,413,158 | (356,695 | ) | |||||||||||||||
01/19/2018 |
State Street Bank and Trust Co. | AUD | 7,360,463 | USD | 5,562,905 | (180,062 | ) | |||||||||||||||
01/19/2018 |
State Street Bank and Trust Co. | CAD | 17,769,716 | USD | 13,810,517 | (331,863 | ) | |||||||||||||||
01/19/2018 |
State Street Bank and Trust Co. | CHF | 9,624,667 | USD | 9,726,740 | (167,310 | ) | |||||||||||||||
01/19/2018 |
State Street Bank and Trust Co. | EUR | 14,749,886 | USD | 17,374,113 | (346,363 | ) | |||||||||||||||
01/19/2018 |
State Street Bank and Trust Co. | GBP | 23,514,137 | USD | 31,415,405 | (354,652 | ) | |||||||||||||||
Subtotal |
(2,777,043 | ) | ||||||||||||||||||||
Total Forward Foreign Currency Contracts Currency Risk |
|
$ | (2,764,005 | ) |
Currency Abbreviations:
AUD | Australian Dollar | |
CAD | Canadian Dollar | |
CHF | Swiss Franc | |
EUR | Euro | |
GBP | British Pound Sterling | |
USD | U.S. Dollar |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Growth and Income Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Growth and Income Fund
Statement of Changes in Net Assets
For the years ended December 31, 2017 and 2016
2017 | 2016 | |||||||
Operations: |
||||||||
Net investment income |
$ | 33,140,004 | $ | 25,590,251 | ||||
Net realized gain |
170,194,828 | 80,727,734 | ||||||
Change in net unrealized appreciation |
57,350,489 | 222,115,422 | ||||||
Net increase in net assets resulting from operations |
260,685,321 | 328,433,407 | ||||||
Distributions to shareholders from net investment income: |
||||||||
Series I |
(2,699,090 | ) | (1,752,815 | ) | ||||
Series ll |
(23,299,802 | ) | (15,406,306 | ) | ||||
Total distributions from net investment income |
(25,998,892 | ) | (17,159,121 | ) | ||||
Distributions to shareholders from net realized gains: |
||||||||
Series l |
(7,416,214 | ) | (14,485,559 | ) | ||||
Series ll |
(74,973,902 | ) | (163,022,756 | ) | ||||
Total distributions from net realized gains |
(82,390,116 | ) | (177,508,315 | ) | ||||
Share transactionsnet: |
||||||||
Series l |
5,625,071 | 7,123,071 | ||||||
Series ll |
(153,738,313 | ) | 281,089,879 | |||||
Net increase (decrease) in net assets resulting from share transactions |
(148,113,242 | ) | 288,212,950 | |||||
Net increase in net assets |
4,183,071 | 421,978,921 | ||||||
Net assets: |
||||||||
Beginning of year |
2,006,156,007 | 1,584,177,086 | ||||||
End of year (includes undistributed net investment income of $32,933,079 and $25,770,737, respectively) |
$ | 2,010,339,078 | $ | 2,006,156,007 |
Notes to Financial Statements
December 31, 2017
NOTE 1Significant Accounting Policies
Invesco V.I. Growth and Income Fund (the Fund) is a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Trust). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end series management investment company consisting of twenty-four separate portfolios, (each constituting a Fund). The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each Fund or class will be voted on exclusively by the shareholders of such Fund or class. Current Securities and Exchange Commission (SEC) guidance, however, requires participating insurance companies offering separate accounts to vote shares proportionally in accordance with the instructions of the contract owners whose investments are funded by shares of each Fund or class.
The Funds investment objective is to seek long-term growth of capital and income.
The Fund currently offers two classes of shares, Series I and Series II, both of which are offered to insurance company separate accounts funding variable annuity contracts and variable life insurance policies (variable products).
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946, Financial Services Investment Companies.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations Securities, including restricted securities, are valued according to the following policy. |
A security listed or traded on an exchange (except convertible securities) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and asked prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and asked prices. For purposes of determining net asset value (NAV) per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (NYSE).
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end-of-day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
Invesco V.I. Growth and Income Fund
Debt obligations (including convertible securities) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual trading characteristics and other market data. Pricing services generally value debt obligations assuming orderly transactions of institutional round lot size, but a fund may hold or transact in the same securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Foreign securities (including foreign exchange contracts) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that the investment adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trusts officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/asked quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a securitys fair value.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuers assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
B. | Securities Transactions and Investment Income Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any) is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Funds net asset value and, accordingly, they reduce the Funds total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and the Statement of Changes in Net Assets, or the net investment income per share and the ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. | Country Determination For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuers securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
D. | Distributions Distributions from net investment income and net realized capital gain, if any, are generally declared and paid to separate accounts of participating insurance companies annually and recorded on the ex-dividend date. |
E. | Federal Income Taxes The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the Internal Revenue Code), necessary to qualify as a regulated investment company and to distribute substantially all of the Funds taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. |
Invesco V.I. Growth and Income Fund
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Funds uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
F. | Expenses Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
G. | Accounting Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
H. | Indemnifications Under the Trusts organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Funds servicing agreements, that contain a variety of indemnification clauses. The Funds maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
I. | Foreign Currency Translations Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Funds books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. |
The Fund may invest in foreign securities, which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests and are shown in the Statement of Operations.
J. | Forward Foreign Currency Contracts The Fund may engage in foreign currency transactions either on a spot (i.e. for prompt delivery and settlement) basis, or through forward foreign currency contracts, to manage or minimize currency or exchange rate risk. |
The Fund may also enter into forward foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to lock in the U.S. dollar price of that security, or the Fund may also enter into forward foreign currency contracts that do not provide for physical settlement of the two currencies, but instead are settled by a single cash payment calculated as the difference between the agreed upon exchange rate and the spot rate at settlement based upon an agreed upon notional amount (non-deliverable forwards). The Fund will set aside liquid assets in an amount equal to the daily mark-to-market obligation for forward foreign currency contracts.
A forward foreign currency contract is an obligation between two parties (Counterparties) to purchase or sell a specific currency for an agreed-upon price at a future date. The use of forward foreign currency contracts does not eliminate fluctuations in the price of the underlying securities the Fund owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statement of Operations. The primary risks associated with forward foreign currency contracts include failure of the Counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities.
NOTE 2Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the Adviser or Invesco). Under the terms of the investment advisory agreement, the Fund accrues daily and pays monthly an advisory fee to the Adviser based on the annual rate of the Funds average daily net assets as follows:
Average Daily Net Assets | Rate | |||
First $500 million |
0.60% | |||
Over $500 million |
0.55% |
For the year ended December 31, 2017, the effective advisory fees incurred by the Fund was 0.56%.
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. and separate sub-advisory agreements with Invesco PowerShares Capital Management LLC and Invesco Asset Management (India) Private Limited (collectively, the Affiliated Sub-Advisers) the Adviser, not the Fund, will pay 40% of the fees paid to the Adviser to any such
Invesco V.I. Growth and Income Fund
Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least April 30, 2019, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Series I shares to 0.78% and Series II shares to 1.03% of average daily net assets (the expense limits). In determining the Advisers obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on April 30, 2019. During its term, the fee waiver agreement cannot be terminated or amended to increase the expense limits or reduce the advisory fee waiver without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
Further, the Adviser has contractually agreed, through at least June 30, 2019, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the year ended December 31, 2017, the Adviser waived advisory fees of $53,761.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco a fee for costs incurred in providing accounting services and fund administrative services to the Fund and to reimburse Invesco for fees paid to insurance companies that have agreed to provide certain administrative services to the Fund. These administrative services provided by the insurance companies may include, among other things: maintenance of master accounts with the Fund; tracking, recording and transmitting net purchase and redemption orders for Fund shares; maintaining and preserving records related to the purchase, redemption and other account activity of variable product owners; distributing copies of Fund documents such as prospectuses, proxy materials and periodic reports, to variable product owners, and responding to inquiries from variable product owners about the Fund. Pursuant to such agreement, for the year ended December 31, 2017, Invesco was paid $412,584 for accounting and fund administrative services and was reimbursed $2,966,878 for fees paid to insurance companies.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (IIS) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. For the year ended December 31, 2017, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
The Trust has entered into a master distribution agreement with Invesco Distributors, Inc. (IDI) to serve as the distributor for the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Funds Series II shares (the Plan). The Fund, pursuant to the Plan, pays IDI compensation at the annual rate of 0.25% of the Funds average daily net assets of Series II shares. The fees are accrued daily and paid monthly. Of the Plan payments, up to 0.25% of the average daily net assets of the Series II shares may be paid to insurance companies who furnish continuing personal shareholder services to customers who purchase and own Series II shares of the Fund. For the year ended December 31, 2017, expenses incurred under the Plan are detailed in the Statement of Operations as Distribution fees.
For the year ended December 31, 2017, the Fund incurred $10,905 in brokerage commissions with Invesco Capital Markets, Inc., an affiliate of the Adviser and IDI, for portfolio transactions executed on behalf of the Fund.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
NOTE 3Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investments assigned level:
Level 1 | Prices are determined using quoted prices in an active market for identical assets. |
Level 2 | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Level 3 | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Funds own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of December 31, 2017. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
Invesco V.I. Growth and Income Fund
The Funds policy is to recognize transfers in and out of the valuation levels as of the end of the reporting period. During the year ended December 31, 2017, there were transfers from Level 1 to Level 2 of $17,951,339 and from Level 2 to Level 1 of $71,472,503, due to foreign fair value adjustments.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Investments in Securities |
||||||||||||||||
Common Stocks & Other Equity Interests |
$ | 1,885,443,391 | $ | 61,972,440 | $ | | $ | 1,947,415,831 | ||||||||
Money Market Funds |
67,245,331 | | | 67,245,331 | ||||||||||||
Total Investments in Securities |
1,952,688,722 | 61,972,440 | | 2,014,661,162 | ||||||||||||
Other Investments Assets* |
||||||||||||||||
Forward Foreign Currency Contracts |
| 13,038 | | 13,038 | ||||||||||||
Other Investments Liabilities* |
||||||||||||||||
Forward Foreign Currency Contracts |
| (2,777,043 | ) | | (2,777,043 | ) | ||||||||||
Total Other Investments |
| (2,764,005 | ) | | (2,764,005 | ) | ||||||||||
Total Investments |
$ | 1,952,688,722 | $ | 59,208,435 | $ | | $ | 2,011,897,157 |
* | Unrealized appreciation (depreciation). |
NOTE 4Derivative Investments
The Fund may enter into an International Swaps and Derivatives Association Master Agreement (ISDA Master Agreement) under which a fund may trade OTC derivatives. An OTC transaction entered into under an ISDA Master Agreement typically involves a collateral posting arrangement, payment netting provisions and close-out netting provisions. These netting provisions allow for reduction of credit risk through netting of contractual obligations. The enforceability of the netting provisions of the ISDA Master Agreement depends on the governing law of the ISDA Master Agreement, among other factors.
For financial reporting purposes, the Fund does not offset OTC derivative assets or liabilities that are subject to ISDA Master Agreements in the Statement of Assets and Liabilities.
Value of Derivative Investments at Period-End
The table below summarizes the value of the Funds derivative investments, detailed by primary risk exposure, held as of December 31, 2017:
Value | ||||
Derivative Assets | Currency Risk |
|||
Unrealized appreciation on forward foreign currency contracts outstanding |
$ | 13,038 | ||
Derivatives not subject to master netting agreements |
| |||
Total Derivative Assets subject to master netting agreements |
$ | 13,038 |
Value | ||||
Derivative Liabilities | Currency Risk |
|||
Unrealized depreciation on forward foreign currency contracts outstanding |
$ | (2,777,043 | ) | |
Derivatives not subject to master netting agreements |
| |||
Total Derivative Liabilities subject to master netting agreements |
$ | (2,777,043 | ) |
Offsetting Assets and Liabilities
The table below reflects the Funds exposure to Counterparties subject to either an ISDA Master Agreement or other agreement for OTC derivative transactions as of December 31, 2017.
Financial Derivative Assets |
Financial Derivative Liabilities |
Collateral (Received)/Pledged | ||||||||||||||||||||||
Counterparty | Forward Foreign Currency Contracts |
Forward Foreign Currency Contracts |
Net Value of Derivatives |
Non-Cash | Cash | Net Amount |
||||||||||||||||||
Bank of New York Mellon (The) |
$ | | $ | (1,396,793 | ) | $ | (1,396,793 | ) | $ | | $ | | $ | (1,396,793 | ) | |||||||||
State Street Bank and Trust Co. |
13,038 | (1,380,250 | ) | (1,367,212 | ) | | | (1,367,212 | ) | |||||||||||||||
Total |
$ | 13,038 | $ | (2,777,043 | ) | $ | (2,764,005 | ) | $ | | $ | | $ | (2,764,005 | ) |
Invesco V.I. Growth and Income Fund
Effect of Derivative Investments for the year ended December 31, 2017
The table below summarizes the gains (losses) on derivative investments, detailed by primary risk exposure, recognized in earnings during the period:
Location of Gain (Loss) on Statement of Operations |
||||
Currency Risk |
||||
Realized Gain (Loss): |
||||
Forward foreign currency contracts |
$ | (5,342,727 | ) | |
Change in Net Unrealized Appreciation (Depreciation): |
||||
Forward foreign currency contracts |
(5,957,990 | ) | ||
Total |
$ | (11,300,717 | ) |
The table below summarizes the average notional value of forward foreign currency contracts outstanding during the period.
Forward Foreign Currency Contracts |
||||
Average notional value |
$ | 172,548,287 |
NOTE 5Security Transactions with Affiliated Funds
The Fund is permitted to purchase or sell securities from or to certain other Invesco Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment adviser (or affiliated investment advisers), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, for the year ended December 31, 2017, the Fund engaged in securities purchases of $6,029,687.
NOTE 6Trustees and Officers Fees and Benefits
Trustees and Officers Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees and Officers Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees were eligible to participate in a retirement plan that provided for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees and Officers Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 7Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period-end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 8Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended December 31, 2017 and 2016:
2017 | 2016 | |||||||
Ordinary income |
$ | 33,469,069 | $ | 17,159,121 | ||||
Long-term capital gain |
74,919,939 | 177,508,315 | ||||||
Total distributions |
$ | 108,389,008 | $ | 194,667,436 |
Invesco V.I. Growth and Income Fund
Tax Components of Net Assets at Period-End:
2017 | ||||
Undistributed ordinary income |
$ | 38,073,012 | ||
Undistributed long-term gain |
158,580,070 | |||
Net unrealized appreciation investments |
421,519,055 | |||
Net unrealized appreciation foreign currencies |
17,027 | |||
Temporary book/tax differences |
(212,946 | ) | ||
Shares of beneficial interest |
1,392,362,860 | |||
Total net assets |
$ | 2,010,339,078 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Funds net unrealized appreciation difference is attributable primarily to forward foreign currency contracts and wash sales.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Funds temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund does not have a capital loss carryforward as of December 31, 2017.
NOTE 9Investment Transactions
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended December 31, 2017 was $328,355,100 and $587,391,089, respectively. Cost of investments, including any derivatives, on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investments on a Tax Basis | ||||
Aggregate unrealized appreciation of investments |
$ | 489,494,633 | ||
Aggregate unrealized (depreciation) of investments |
(67,975,578 | ) | ||
Net unrealized appreciation of investments |
$ | 421,519,055 |
Cost of investments for tax purposes is $1,590,378,102.
NOTE 10Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of fair fund tax adjustments and foreign currency transactions, on December 31, 2017, undistributed net investment income was increased by $21,230 and undistributed net realized gain was decreased by $21,230. This reclassification had no effect on the net assets of the Fund.
Invesco V.I. Growth and Income Fund
NOTE 11Share Information
Summary of Share Activity |
||||||||||||||||
Years ended December 31, | ||||||||||||||||
2017(a) | 2016 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: |
||||||||||||||||
Series I |
1,248,121 | $ | 26,984,341 | 1,098,200 | $ | 21,457,639 | ||||||||||
Series II |
1,126,956 | 24,398,016 | 26,177,046 | 523,596,316 | ||||||||||||
Issued as reinvestment of dividends: |
||||||||||||||||
Series I |
472,016 | 10,115,304 | 855,102 | 16,238,374 | ||||||||||||
Series II |
4,592,229 | 98,273,704 | 9,405,855 | 178,429,062 | ||||||||||||
Reacquired: |
||||||||||||||||
Series I |
(1,454,161 | ) | (31,474,574 | ) | (1,574,684 | ) | (30,572,942 | ) | ||||||||
Series II |
(12,689,269 | ) | (276,410,033 | ) | (21,459,558 | ) | (420,935,499 | ) | ||||||||
Net increase (decrease) in share activity |
(6,704,108 | ) | $ | (148,113,242 | ) | 14,501,961 | $ | 288,212,950 |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 79% of the outstanding shares of the Fund. The Fund and the Funds principal underwriter or adviser, are parties to participation agreements with these entities whereby these entities sell units of interest in separate accounts funding variable products that are invested in the Fund. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
NOTE 12Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Net asset value, beginning of period |
Net investment income(a) |
Net gains (losses) on securities (both realized and unrealized) |
Total from investment operations |
Dividends from net investment income |
Distributions from net realized gains |
Total distributions |
Net asset value, end of period |
Total return(b) |
Net assets, end of period (000s omitted) |
Ratio
of expenses to average net assets with fee waivers and/or expenses absorbed |
Ratio of expenses to average net assets without fee waivers and/or expenses absorbed |
Ratio of net investment income to average net assets |
Portfolio turnover(c) |
|||||||||||||||||||||||||||||||||||||||||||
Series I |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/17 |
$ | 21.05 | $ | 0.41 | (d) | $ | 2.52 | $ | 2.93 | $ | (0.34 | ) | $ | (0.94 | ) | $ | (1.28 | ) | $ | 22.70 | 14.32 | % | $ | 187,254 | 0.76 | %(e) | 0.76 | %(e) | 1.90 | %(d)(e) | 17 | % | ||||||||||||||||||||||||
Year ended 12/31/16 |
19.60 | 0.33 | 3.29 | 3.62 | (0.23 | ) | (1.94 | ) | (2.17 | ) | 21.05 | 19.69 | 168,082 | 0.77 | 0.79 | 1.69 | 28 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 |
25.15 | 0.33 | (1.30 | ) | (0.97 | ) | (0.74 | ) | (3.84 | ) | (4.58 | ) | 19.60 | (3.06 | ) | 149,066 | 0.78 | 0.84 | 1.41 | 22 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 |
26.29 | 0.59 | (f) | 2.02 | 2.61 | (0.50 | ) | (3.25 | ) | (3.75 | ) | 25.15 | 10.28 | 161,866 | 0.78 | 0.83 | 2.22 | (f) | 31 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 |
20.07 | 0.32 | 6.47 | 6.79 | (0.36 | ) | (0.21 | ) | (0.57 | ) | 26.29 | 34.08 | 170,637 | 0.75 | 0.83 | 1.37 | 29 | |||||||||||||||||||||||||||||||||||||||
Series II |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/17 |
21.02 | 0.36 | (d) | 2.51 | 2.87 | (0.29 | ) | (0.94 | ) | (1.23 | ) | 22.66 | 14.04 | 1,823,085 | 1.01 | (e) | 1.01 | (e) | 1.65 | (d)(e) | 17 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/16 |
19.58 | 0.28 | 3.28 | 3.56 | (0.18 | ) | (1.94 | ) | (2.12 | ) | 21.02 | 19.37 | 1,838,074 | 1.02 | 1.04 | 1.44 | 28 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 |
25.09 | 0.27 | (1.29 | ) | (1.02 | ) | (0.65 | ) | (3.84 | ) | (4.49 | ) | 19.58 | (3.26 | ) | 1,435,111 | 1.03 | 1.09 | 1.16 | 22 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 |
26.23 | 0.52 | (f) | 2.01 | 2.53 | (0.42 | ) | (3.25 | ) | (3.67 | ) | 25.09 | 9.96 | 1,828,854 | 1.03 | 1.08 | 1.97 | (f) | 31 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 |
20.03 | 0.26 | 6.46 | 6.72 | (0.31 | ) | (0.21 | ) | (0.52 | ) | 26.23 | 33.77 | 2,335,747 | 1.00 | 1.08 | 1.12 | 29 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year, if applicable, and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns. |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. |
(d) | Net investment income per share and the ratio of net investment income to average net assets include significant dividends received during the period. Net investment income per share and the ratio of net investment income to average net assets excluding the significant dividends are $0.30 and 1.42%, and $0.25 and 1.17%, for Series I and Series II, respectively. |
(e) | Ratios are based on average daily net assets (000s omitted) of $175,058 and $1,806,363 for Series I and Series II shares, respectively. |
(f) | Net investment income per share and the ratio of net investment income to average net assets include significant dividends received during the period. Net investment income per share and the ratio of net investment income to average net assets excluding the significant dividends are $0.35 and 1.29%, and $0.28 and 1.04%, for Series I and Series II, respectively. |
Invesco V.I. Growth and Income Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
and Shareholders of Invesco V.I. Growth & Income Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Invesco V.I. Growth & Income Fund (one of the funds constituting AIM Variable Insurance Funds (Invesco Variable Insurance Funds), hereafter referred to as the Fund) as of December 31, 2017, the related statement of operations for the year ended December 31, 2017, the statement of changes in net assets for each of the two years in the period ended December 31, 2017, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2017 (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2017 and the financial highlights for each of the five years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Funds management. Our responsibility is to express an opinion on the Funds financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2017 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, TX
February 14, 2018
We have served as the auditor of one or more of the investment companies in the Invesco/PowerShares group of investment companies since at least 1995. We have not determined the specific year we began serving as auditor.
Invesco V.I. Growth and Income Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period July 1, 2017 through December 31, 2017.
The actual and hypothetical expenses in the examples below do not represent the effect of any fees or other expenses assessed in connection with a variable product; if they did, the expenses shown would be higher while the ending account values shown would be lower.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled Actual Expenses Paid During Period to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Funds actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs. Therefore, the hypothetical information is useful in comparing ongoing costs, and will not help you determine the relative total costs of owning different funds.
Class |
Beginning Account Value (07/01/17) |
ACTUAL | HYPOTHETICAL (5% annual return before expenses) |
Annualized Ratio |
||||||||||||||||||||
Ending Account Value (12/31/17)1 |
Expenses Paid During Period2 |
Ending Account Value (12/31/17) |
Expenses Paid During Period2 |
|||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 1,092.80 | $ | 4.01 | $ | 1,021.37 | $ | 3.87 | 0.76 | % | ||||||||||||
Series II | 1,000.00 | 1,091.50 | 5.32 | 1,020.11 | 5.14 | 1.01 |
1 | The actual ending account value is based on the actual total return of the Fund for the period July 1, 2017 through December 31, 2017, after actual expenses and will differ from the hypothetical ending account value which is based on the Funds expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Funds annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half year. |
Invesco V.I. Growth and Income Fund
Tax Information
Form 1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific states requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended December 31, 2017:
Federal and State Income Tax |
||||
Long-Term Capital Gain Distributions |
$ | 74,919,939 | ||
Corporate Dividends Received Deduction* |
98.86 | % | ||
U.S. Treasury Obligations* |
0.00 | % |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Funds fiscal year. |
Invesco V.I. Growth and Income Fund
Trustees and Officers
The address of each trustee and officer is AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Trust), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trusts organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 1960 Trustee |
2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business
Formerly: Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US), Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) |
158 | None | ||||
Philip A. Taylor2 1954 Trustee and Senior Vice President |
2006 | Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco Aim Management Group, Inc.) (financial services holding company); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.) (registered transfer agent); Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company); Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management).
Formerly: Co-Chairman, Co-President and Co-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chief Executive Officer and President, Van Kampen Exchange Corp; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurers Series Trust (Invesco Treasurers Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurers Series Trust (Invesco Treasurers Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) (registered broker dealer); Manager, Invesco PowerShares Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco Aim Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurers Series Trust (Invesco Treasurers Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. |
158 | None |
1 | Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser. |
2 | Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser. |
Invesco V.I. Growth and Income Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Independent Trustees | ||||||||
Bruce L. Crockett 1944 Trustee and Chair |
1993 | Chairman, Crockett Technologies Associates (technology consulting company)
Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute: Member of the Audit Committee, Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council |
158 | Director and Chairman of the Audit Committee, ALPS (Attorneys Liability Protection Society) (insurance company); Director and Member of the Audit Committee and Compensation Committee, Ferroglobe PLC (metallurgical company) | ||||
David C. Arch 1945 Trustee |
2010 | Chairman of Blistex Inc. (consumer health care products manufacturer); Member, World Presidents Organization | 158 | Board member of the Illinois Manufacturers Association | ||||
Jack M. Fields 1952 Trustee |
1997 | Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Chairman, Discovery Learning Alliance (non-profit)
Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff) (human resources provider); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives |
158 | None | ||||
Cynthia Hostetler 1962 Trustee |
2017 | Non-Executive Director and Trustee of a number of public and private business corporations
Formerly: Head of Investment Funds and Private Equity, Overseas Private Investment Corporation; President, First Manhattan Bancorporation, Inc.; Attorney, Simpson Thacher & Bartlett LLP |
158 | Vulcan Materials Company (construction materials company); Trilinc Global Impact Fund; Aberdeen Investment Funds (4 portfolios); Artio Global Investment LLC (mutual fund complex); Edgen Group, Inc. (specialized energy and infrastructure products distributor) | ||||
Eli Jones 1961 Trustee |
2016 | Professor and Dean, Mays Business School Texas A&M University
Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University; Director, Arvest Bank |
158 | Insperity, Inc. (formerly known as Administaff) (human resources provider) | ||||
Prema Mathai-Davis 1950 Trustee |
1998 | Retired. | 158 | None | ||||
Teresa M. Ressel 1962 Trustee |
2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Chief Financial Officer, Olayan America, The Olayan Group (international investor/commercial/industrial); Chief Executive Officer, UBS Securities LLC; Group Chief Operating Officer, Americas, UBS AG; Assistant Secretary for Management & Budget and CFO, US Department of the Treasury |
158 | Atlantic Power Corporation (power generation company); ON Semiconductor Corp. (semiconductor supplier) | ||||
Ann Barnett Stern 1957 Trustee |
2017 | President and Chief Executive Officer, Houston Endowment Inc. (private philanthropic institution)
Formerly: Executive Vice President and General Counsel, Texas Childrens Hospital; Attorney, Beck, Redden and Secrest, LLP; Business Law Instructor, University of St. Thomas; Attorney, Andrews & Kurth LLP |
158 | Federal Reserve Bank of Dallas | ||||
Raymond Stickel, Jr. 1944 Trustee |
2005 | Retired.
Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios); Partner, Deloitte & Touche |
158 | None | ||||
Robert C. Troccoli 1949 Trustee |
2016 | Adjunct Professor, University of Denver Daniels College of Business
Formerly: Senior Partner, KPMG LLP |
158 | None | ||||
Christopher L. Wilson 1957 Trustee |
2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Managing Partner, CT2, LLC (investing and consulting firm); President/Chief Executive Officer, Columbia Funds, Bank of America Corporation; President/Chief Executive Officer, CDC IXIS Asset Management Services, Inc.; Principal & Director of Operations, Scudder Funds, Scudder, Stevens & Clark, Inc.; Assistant Vice President, Fidelity Investments |
158 | TD Asset Management USA Inc. (mutual fund complex) (22 portfolios); ISO New England, Inc. (non-profit organization managing regional electricity market) |
Invesco V.I. Growth and Income Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers | ||||||||
Sheri Morris 1964 President, Principal Executive Officer and Treasurer |
1999 | President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco Aim Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; and Treasurer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust and PowerShares Actively Managed Exchange-Traded Fund Trust |
N/A | N/A | ||||
Russell C. Burk 1958 Senior Vice President and Senior Officer |
2005 | Senior Vice President and Senior Officer, The Invesco Funds | N/A | N/A | ||||
John M. Zerr 1962 Senior Vice President, Chief Legal Officer and Secretary |
2006 | Director, Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Managing Director, Invesco PowerShares Capital Management LLC; Director, Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust; Manager and Secretary, Invesco Indexing LLC
Formerly: Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser); Vice President and Secretary, PBHG Funds (an investment company) and PBHG Insurance Series Fund (an investment company); Chief Operating Officer, General Counsel and Secretary, Old Mutual Investment Partners (a broker-dealer); General Counsel and Secretary, Old Mutual Fund Services (an administrator) and Old Mutual Shareholder Services (a shareholder servicing center); Executive Vice President, General Counsel and Secretary, Old Mutual Capital, Inc. (an investment adviser); and Vice President and Secretary, Old Mutual Advisors Funds (an investment company) |
N/A | N/A | ||||
Gregory G. McGreevey 1962 Senior Vice President |
2012 | Senior Managing Director, Invesco Ltd.; Director, Chairman, President, and Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President, Invesco Management Group, Inc.; Director, Invesco Mortgage Capital, Inc. and Invesco Senior Secured Management, Inc.; and Senior Vice President, The Invesco Funds
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A | ||||
Kelli Gallegos 1970 Vice President, Principal Financial Officer and Assistant Treasurer |
2008 | Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A |
Invesco V.I. Growth and Income Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers(continued) | ||||||||
Tracy Sullivan 1962 Vice President, Chief Tax Officer and Assistant Treasurer |
2008 | Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A | ||||
Crissie M. Wisdom 1969 Anti-Money Laundering Compliance Officer |
2013 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., Invesco Management Group, Inc., The Invesco Funds, and PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp. |
N/A | N/A | ||||
Robert R. Leveille 1969 Chief Compliance Officer |
2016 | Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds
Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds |
N/A | N/A |
The Statement of Additional Information of the Trust includes additional information about the Funds Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Funds Statement of Additional Information for information on the Funds sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 |
Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Auditors PricewaterhouseCoopers LLP 1000 Louisiana Street, Suite 5800 Houston, TX 77002-5678 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2005 Market Street, Suite 2600 Philadelphia, PA 19103-7018 |
Counsel to the Independent Trustees Goodwin Procter LLP 901 New York Avenue, N.W. Washington, D.C. 20001 |
Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
Invesco V.I. Growth and Income Fund
| ||||
Annual Report to Shareholders
|
December 31, 2017 | |||
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Invesco V.I. High Yield Fund
|
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Funds semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The Funds Form N-Q filings are available on the SEC website, sec.gov. Copies of the Funds Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-07452 and 033-57340. The Funds most recent portfolio holdings, as filed on Form N-Q, have also been made available to insurance companies issuing variable annuity contracts and variable life insurance policies (variable products) that invest in the Fund. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/ proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
This report must be accompanied or preceded by a currently effective Fund prospectus and variable product prospectus, which contain more complete information, including sales charges and expenses. Investors should read each carefully before investing.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE | ||
Invesco Distributors, Inc. VIHYI-AR-1 02142018 0916 |
Managements Discussion of Fund Performance
Invesco V.I. High Yield Fund
Invesco V.I. High Yield Fund
Your Funds Long-Term Performance
Results of a $10,000 Investment Oldest Share Class(es)
Fund and index data from 12/31/07
1 | Source: FactSet Research Systems Inc. |
2 | Source: Lipper Inc. |
Past performance cannot guarantee
comparable future results.
Invesco V.I. High Yield Fund
Invesco V.I. High Yield Funds investment objective is total return, comprised of current income and capital appreciation.
∎ | Unless otherwise stated, information presented in this report is as of December 31, 2017, and is based on total net assets. |
∎ | Unless otherwise noted, all data provided by Invesco. |
Invesco V.I. High Yield Fund
Invesco V.I. High Yield Fund
Schedule of Investments(a)
December 31, 2017
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. High Yield Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. High Yield Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. High Yield Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. High Yield Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. High Yield Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. High Yield Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. High Yield Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. High Yield Fund
Investment Abbreviations:
Deb. | Debentures | |
ETF | Exchange-Traded Fund | |
EUR | Euro | |
GBP | British Pound | |
Gtd. | Guaranteed | |
GUC | General Unsecured Creditors | |
Jr. | Junior | |
LIBOR | London Interbank Offered Rate | |
Pfd. | Preferred | |
PIK | Pay-in-Kind | |
REGS | Regulation S | |
REIT | Real Estate Investment Trust | |
Sec. | Secured | |
SPDR | Standard & Poors Depositary Receipt | |
Sr. | Senior | |
Sub. | Subordinated | |
Unsec. | Unsecured | |
USD | United States Dollar |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. High Yield Fund
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poors. |
(b) | Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended (the 1933 Act). The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The aggregate value of these securities at December 31, 2017 was $67,920,748, which represented 39.45% of the Funds Net Assets. |
(c) | Security valued using significant unobservable inputs (Level 3). See Note 3. |
(d) | Defaulted security. Currently, the issuer is partially or fully in default with respect to interest payments. The value of this security at December 31, 2017 represented less than 1% of the Funds Net Assets. |
(e) | Perpetual bond with no specified maturity date. |
(f) | All or a portion of this security is Pay-in-Kind. Pay-in-Kind securities pay interest income in the form of securities. |
(g) | Variable rate senior loan interests are, at present, not readily marketable, not registered under the 1933 Act and may be subject to contractual and legal restrictions on sale. Variable rate senior loan interests in the Funds portfolio generally have variable rates which adjust to a base, such as the London Interbank Offered Rate ("LIBOR"), on set dates, typically every 30 days but not greater than one year; and/or have interest rates that float at a margin above a widely recognized base lending rate such as the Prime Rate of a designated U.S. bank. |
(h) | This variable rate interest will settle after December 31, 2017, at which time the interest rate will be determined. |
(i) | Foreign denominated security. Principal amount is denominated in the currency indicated. |
(j) | Security traded on a discount basis. The interest rate shown represents the discount rate at the time of purchase by the Fund. |
(k) | All or a portion of the value was designated as collateral to cover margin requirements for swap agreements. See Note 1N. |
(l) | Non-income producing security. |
(m) | Acquired as part of the Adelphia Communications bankruptcy reorganization. |
(n) | The money market fund and the Fund are affiliated by having the same investment adviser. The rate shown is the 7-day SEC standardized yield as of December 31, 2017. |
Open Forward Foreign Currency Contracts | ||||||||||||||||||||||
Settlement |
Counterparty |
Contract to | Unrealized Appreciation (Depreciation) |
|||||||||||||||||||
Deliver | Receive | |||||||||||||||||||||
02/28/2018 |
Barclays Bank PLC |
EUR | 290,478 | USD | 343,113 | $ | (6,659 | ) | ||||||||||||||
02/28/2018 |
Barclays Bank PLC |
GBP | 353,033 | USD | 469,056 | (8,505 | ) | |||||||||||||||
Total Forward Foreign Currency Contracts Currency Risk |
$ | (15,164 | ) |
Open Centrally Cleared Credit Default Swap Agreements Credit Risk | ||||||||||||||||||||||||||||||||||||||||
Reference Entity | Buy/Sell Protection |
(Pay)/Receive Fixed Rate |
Payment Frequency |
Maturity Date |
Implied Credit |
Notional Value |
Upfront Payments Paid (Received) |
Value | Unrealized Appreciation(b) |
|||||||||||||||||||||||||||||||
Markit CDX North America |
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High Yield Index, Series 28, Version 1 |
Sell | 5.00 | % | Quarterly | 06/20/2022 | 2.79 | % | USD | 6,930,000 | $ | 441,591 | $ | 607,840 | $ | 166,249 |
Currency Abbreviations:
EUR | Euro | |
GBP | British Pound Sterling | |
USD | U.S. Dollar |
(a) | Implied credit spreads represent the current level, as of December 31, 2017, at which protection could be bought or sold given the terms of the existing credit default swap agreement and serve as an indicator of the current status of the payment/performance risk of the credit default swap agreement. An implied credit spread that has widened or increased since entry into the initial agreement may indicate a deteriorating credit profile and increased risk of default for the reference entity. A declining or narrowing spread may indicate an improving credit profile or decreased risk of default for the reference entity. Alternatively, credit spreads may increase or decrease reflecting the general tolerance for risk in the credit markets generally. |
(b) | The daily variation margin receivable at period end is recorded in the Statement of Assets and Liabilities. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. High Yield Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. High Yield Fund
Statement of Changes in Net Assets
For the years ended December 31, 2017 and 2016
2017 | 2016 | |||||||
Operations: |
||||||||
Net investment income |
$ | 8,625,415 | $ | 8,396,076 | ||||
Net realized gain (loss) |
1,465,141 | (5,542,632 | ) | |||||
Change in net unrealized appreciation |
766,828 | 13,733,616 | ||||||
Net increase in net assets resulting from operations |
10,857,384 | 16,587,060 | ||||||
Distributions to shareholders from net investment income: |
||||||||
Series I |
(4,535,246 | ) | (4,133,290 | ) | ||||
Series ll |
(3,468,057 | ) | (3,068,973 | ) | ||||
Total distributions from net investment income |
(8,003,303 | ) | (7,202,263 | ) | ||||
Share transactionsnet: |
||||||||
Series l |
(15,580,462 | ) | 16,319,925 | |||||
Series ll |
7,275,758 | 7,485,826 | ||||||
Net increase (decrease) in net assets resulting from share transactions |
(8,304,704 | ) | 23,805,751 | |||||
Net increase (decrease) in net assets |
(5,450,623 | ) | 33,190,548 | |||||
Net assets: |
||||||||
Beginning of year |
177,624,148 | 144,433,600 | ||||||
End of year (includes undistributed net investment income of $8,624,103 and $7,849,198, respectively) |
$ | 172,173,525 | $ | 177,624,148 |
Notes to Financial Statements
December 31, 2017
NOTE 1Significant Accounting Policies
Invesco V.I. High Yield Fund (the Fund) is a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Trust). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end series management investment company consisting of twenty-four separate portfolios, (each constituting a Fund). The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each Fund or class will be voted on exclusively by the shareholders of such Fund or class. Current Securities and Exchange Commission (SEC) guidance, however, requires participating insurance companies offering separate accounts to vote shares proportionally in accordance with the instructions of the contract owners whose investments are funded by shares of each Fund or class.
The Funds investment objective is total return, comprised of current income and capital appreciation.
The Fund currently offers two classes of shares, Series I and Series II, both of which are offered to insurance company separate accounts funding variable annuity contracts and variable life insurance policies (variable products).
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946, Financial Services Investment Companies.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations Securities, including restricted securities, are valued according to the following policy. |
Debt obligations (including convertible securities) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual trading characteristics and other market data. Pricing services generally value debt obligations assuming orderly transactions of institutional round lot size, but a fund may hold or transact in the same securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Variable rate senior loan interests are fair valued using quotes provided by an independent pricing service. Quotes provided by the pricing service may reflect appropriate factors such as ratings, tranche type, industry, company performance, spread, individual trading characteristics, institution-size trading in similar groups of securities and other market data.
A security listed or traded on an exchange (except convertible securities) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and asked prices from the exchange on which they are principally traded. Options not
Invesco V.I. High Yield Fund
listed on an exchange are valued by an independent source at the mean between the last bid and asked prices. For purposes of determining net asset value (NAV) per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (NYSE).
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end-of-day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
Swap agreements are fair valued using an evaluated quote, if available, provided by an independent pricing service. Evaluated quotes provided by the pricing service are valued based on a model which may include end-of-day net present values, spreads, ratings, industry, company performance and returns of referenced assets. Centrally cleared swap agreements are valued at the daily settlement price determined by the relevant exchange or clearinghouse.
Foreign securities (including foreign exchange contracts) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that the investment adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trusts officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/asked quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a securitys fair value.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuers assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
B. | Securities Transactions and Investment Income Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any) is recorded on the accrual basis from settlement date. Bond premiums and discounts are amortized and/or accreted over the lives of the respective securities. Pay-in-kind interest income and non-cash dividend income received in the form of securities in-lieu of cash are recorded at the fair value of the securities received. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Funds net asset value and, accordingly, they reduce the Funds total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and the Statement of Changes in Net Assets, or the net investment income per share and the ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. | Country Determination For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuers securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
D. | Distributions Distributions from net investment income and net realized capital gain, if any, are generally declared and paid to separate accounts of participating insurance companies annually and recorded on the ex-dividend date. |
Invesco V.I. High Yield Fund
E. | Federal Income Taxes The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the Internal Revenue Code), necessary to qualify as a regulated investment company and to distribute substantially all of the Funds taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. |
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Funds uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
F. | Expenses Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
G. | Accounting Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
H. | Indemnifications Under the Trusts organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Funds servicing agreements, that contain a variety of indemnification clauses. The Funds maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
I. | Lower-Rated Securities The Fund normally invests at least 80% of its net assets in lower-quality debt securities, i.e., junk bonds. Investments in lower-rated securities or unrated securities of comparable quality tend to be more sensitive to economic conditions than higher rated securities. Junk bonds involve a greater risk of default by the issuer because such securities are generally unsecured and are often subordinated to other creditors claims. |
J. | Securities Purchased on a When-Issued and Delayed Delivery Basis The Fund may purchase and sell interests in corporate loans and corporate debt securities and other portfolio securities on a when-issued and delayed delivery basis, with payment and delivery scheduled for a future date. No income accrues to the Fund on such interests or securities in connection with such transactions prior to the date the Fund actually takes delivery of such interests or securities. These transactions are subject to market fluctuations and are subject to the risk that the value at delivery may be more or less than the trade date purchase price. Although the Fund will generally purchase these securities with the intention of acquiring such securities, they may sell such securities prior to the settlement date. |
K. | Foreign Currency Translations Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Funds books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. |
The Fund may invest in foreign securities, which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests and are shown in the Statement of Operations.
L. | Forward Foreign Currency Contracts The Fund may engage in foreign currency transactions either on a spot (i.e. for prompt delivery and settlement) basis, or through forward foreign currency contracts, to manage or minimize currency or exchange rate risk. |
The Fund may also enter into forward foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to lock in the U.S. dollar price of that security, or the Fund may also enter into forward foreign currency contracts that do not provide for physical settlement of the two currencies, but instead are settled by a single cash payment calculated as the difference between the agreed upon exchange rate and the spot rate at settlement based upon an agreed upon notional amount (non-deliverable forwards). The Fund will set aside liquid assets in an amount equal to the daily mark-to-market obligation for forward foreign currency contracts.
A forward foreign currency contract is an obligation between two parties (Counterparties) to purchase or sell a specific currency for an agreed-upon price at a future date. The use of forward foreign currency contracts does not eliminate fluctuations in the price of the underlying securities the Fund owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statement of Operations. The primary risks associated with forward foreign currency contracts include failure of the Counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities.
Invesco V.I. High Yield Fund
M. | Futures Contracts The Fund may enter into futures contracts to manage exposure to interest rate, equity and market price movements and/or currency risks. A futures contract is an agreement between Counterparties to purchase or sell a specified underlying security, currency or commodity (or delivery of a cash settlement price, in the case of an index future) for a fixed price at a future date. The Fund currently invests only in exchange-traded futures and they are standardized as to maturity date and underlying financial instrument. Initial margin deposits required upon entering into futures contracts are satisfied by the segregation of specific securities or cash as collateral at the futures commission merchant (broker). During the period the futures contracts are open, changes in the value of the contracts are recognized as unrealized gains or losses by recalculating the value of the contracts on a daily basis. Subsequent or variation margin payments are received or made depending upon whether unrealized gains or losses are incurred. These amounts are reflected as receivables or payables on the Statement of Assets and Liabilities. When the contracts are closed or expire, the Fund recognizes a realized gain or loss equal to the difference between the proceeds from, or cost of, the closing transaction and the Funds basis in the contract. The net realized gain (loss) and the change in unrealized gain (loss) on futures contracts held during the period is included on the Statement of Operations. The primary risks associated with futures contracts are market risk and the absence of a liquid secondary market. If the Fund were unable to liquidate a futures contract and/or enter into an offsetting closing transaction, the Fund would continue to be subject to market risk with respect to the value of the contracts and continue to be required to maintain the margin deposits on the futures contracts. Futures contracts have minimal Counterparty risk since the exchanges clearinghouse, as Counterparty to all exchange-traded futures, guarantees the futures against default. Risks may exceed amounts recognized in the Statement of Assets and Liabilities. |
N. | Swap Agreements The Fund may enter into various swap transactions, including interest rate, total return, index, currency and credit default swap contracts (CDS) for investment purposes or to manage interest rate, currency or credit risk. Such transactions are agreements between Counterparties. A swap agreement may be negotiated bilaterally and traded over-the-counter (OTC) between two parties (uncleared/OTC) or, in some instances, must be transacted through a future commission merchant (FCM) and cleared through a clearinghouse that serves as a central Counterparty (centrally cleared swap). These agreements may contain among other conditions, events of default and termination events, and various covenants and representations such as provisions that require the Fund to maintain a pre-determined level of net assets, and/or provide limits regarding the decline of the Funds NAV over specific periods of time. If the Fund were to trigger such provisions and have open derivative positions at that time, the Counterparty may be able to terminate such agreement and request immediate payment in an amount equal to the net liability positions, if any. |
Interest rate, total return, index, and currency swap agreements are two-party contracts entered into primarily to exchange the returns (or differentials in rates of returns) earned or realized on particular predetermined investments or instruments. The gross returns to be exchanged or swapped between the parties are calculated with respect to a notional amount, i.e., the return on or increase in value of a particular dollar amount invested at a particular interest rate or return of an underlying asset, in a particular foreign currency, or in a basket of securities representing a particular index.
In a centrally cleared swap, the Funds ultimate Counterparty is a central clearinghouse. The Fund initially will enter into centrally cleared swaps through an executing broker. When a fund enters into a centrally cleared swap, it must deliver to the central Counterparty (via the FCM) an amount referred to as initial margin. Initial margin requirements are determined by the central Counterparty, but an FCM may require additional initial margin above the amount required by the central Counterparty. Initial margin deposits required upon entering into centrally cleared swaps are satisfied by cash or securities as collateral at the FCM. Securities deposited as initial margin are designated on the Schedule of Investments and cash deposited is recorded on the Statement of Assets and Liabilities. During the term of a cleared swap agreement, a variation margin amount may be required to be paid by the Fund or may be received by the Fund, based on the daily change in price of the underlying reference instrument subject to the swap agreement and is recorded as a receivable or payable for variation margin in the Statement of Assets and Liabilities until the centrally cleared swap is terminated at which time a realized gain or loss is recorded.
A CDS is an agreement between Counterparties to exchange the credit risk of an issuer. A buyer of a CDS is said to buy protection by paying a fixed payment over the life of the agreement and in some situations an upfront payment to the seller of the CDS. If a defined credit event occurs (such as payment default or bankruptcy), the Fund as a protection buyer would cease paying its fixed payment, the Fund would deliver eligible bonds issued by the reference entity to the seller, and the seller would pay the full notional value, or the par value, of the referenced obligation to the Fund. A seller of a CDS is said to sell protection and thus would receive a fixed payment over the life of the agreement and an upfront payment, if applicable. If a credit event occurs, the Fund as a protection seller would cease to receive the fixed payment stream, the Fund would pay the buyer par value or the full notional value of the referenced obligation, and the Fund would receive the eligible bonds issued by the reference entity. In turn, these bonds may be sold in order to realize a recovery value. Alternatively, the seller of the CDS and its Counterparty may agree to net the notional amount and the market value of the bonds and make a cash payment equal to the difference to the buyer of protection. If no credit event occurs, the Fund receives the fixed payment over the life of the agreement. As the seller, the Fund would effectively add leverage to its portfolio because, in addition to its total net assets, the Fund would be subject to investment exposure on the notional amount of the CDS. In connection with these agreements, cash and securities may be identified as collateral in accordance with the terms of the respective swap agreements to provide assets of value and recourse in the event of default under the swap agreement or bankruptcy/insolvency of a party to the swap agreement. If a Counterparty becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties, the Fund may experience significant delays in obtaining any recovery in a bankruptcy or other reorganization proceeding. The Fund may obtain only limited recovery or may obtain no recovery in such circumstances. The Funds maximum risk of loss from Counterparty risk, either as the protection seller or as the protection buyer, is the value of the contract. The risk may be mitigated by having a master netting arrangement between the Fund and the Counterparty and by the designation of collateral by the Counterparty to cover the Funds exposure to the Counterparty.
Implied credit spreads represent the current level at which protection could be bought or sold given the terms of the existing CDS contract and serve as an indicator of the current status of the payment/performance risk of the CDS. An implied spread that has widened or increased since entry into the initial contract may indicate a deteriorating credit profile and increased risk of default for the reference entity. A declining or narrowing spread may indicate an improving credit profile or decreased risk of default for the reference entity. Alternatively, credit spreads may increase or decrease reflecting the general tolerance for risk in the credit markets.
Invesco V.I. High Yield Fund
An interest rate swap is an agreement between Counterparties pursuant to which the parties exchange a floating rate payment for a fixed rate payment based on a specified notional amount.
Changes in the value of centrally cleared and OTC swap agreements are recognized as unrealized gains (losses) in the Statement of Operations by marking to market on a daily basis to reflect the value of the swap agreement at the end of each trading day. Payments received or paid at the beginning of the agreement are reflected as such on the Statement of Assets and Liabilities and may be referred to as upfront payments. The Fund accrues for the fixed payment stream and amortizes upfront payments, if any, on swap agreements on a daily basis with the net amount, recorded as a component of realized gain (loss) on the Statement of Operations. A liquidation payment received or made at the termination of a swap agreement is recorded as realized gain (loss) on the Statement of Operations. The Fund segregates cash or liquid securities having a value at least equal to the amount of the potential obligation of a Fund under any swap transaction. Cash held as collateral is recorded as deposits with brokers on the Statement of Assets and Liabilities. Entering into these agreements involves, to varying degrees, lack of liquidity and elements of credit, market, and Counterparty risk in excess of amounts recognized on the Statement of Assets and Liabilities. Such risks involve the possibility that a swap is difficult to sell or liquidate; the Counterparty does not honor its obligations under the agreement and unfavorable interest rates and market fluctuations. It is possible that developments in the swaps market, including potential government regulation, could adversely affect the Funds ability to terminate existing swap agreements or to realize amounts to be received under such agreements. A short position in a security poses more risk than holding the same security long. As there is no limit on how much the price of the security can increase, the Funds exposure is unlimited.
Notional amounts of each individual credit default swap agreement outstanding as of December 31, 2017 for which the Fund is the seller of protection are disclosed in the open swap agreements table. These potential amounts would be partially offset by any recovery values of the respective referenced obligations, upfront payments received upon entering into the agreement, or net amounts received from the settlement of buy protection credit default swap agreements entered into by the Fund for the same referenced entity or entities.
O. | Bank Loan Risk Although the resale, or secondary market for floating rate loans has grown substantially over the past decade, both in overall size and number of market participants, there is no organized exchange or board of trade on which floating rate loans are traded. Instead, the secondary market for floating rate loans is a private, unregulated interdealer or interbank resale market. Such a market may therefore be subject to irregular trading activity, wide bid/ask spreads, and extended trade settlement periods, which may impair the Funds ability to sell bank loans within its desired time frame or at an acceptable price and its ability to accurately value existing and prospective investments. Extended trade settlement periods may result in cash not being immediately available to the Fund. As a result, the Fund may have to sell other investments or engage in borrowing transactions to raise cash to meet its obligations. Similar to other asset classes, bank loan funds may be exposed to counterparty credit risk, or the risk than an entity with which the Fund has unsettled or open transactions may fail to or be unable to perform on its commitments. The Fund seeks to manage counterparty credit risk by entering into transactions only with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. |
P. | Leverage Risk Leverage exists when the Fund can lose more than it originally invests because it purchases or sells an instrument or enters into a transaction without investing an amount equal to the full economic exposure of the instrument or transaction. |
Q. | Other Risks The Fund invests in corporate loans from U.S. or non-U.S. companies (the Borrowers). The investment of the Fund in a corporate loan may take the form of participation interests or assignments. If the Fund purchases a participation interest from a syndicate of lenders (Lenders) or one of the participants in the syndicate (Participant), one or more of which administers the loan on behalf of all the Lenders (the Agent Bank), the Fund would be required to rely on the Lender that sold the participation interest not only for the enforcement of the Funds rights against the Borrower but also for the receipt and processing of payments due to the Fund under the corporate loans. As such, the Fund is subject to the credit risk of the Borrower and the Participant. Lenders and Participants interposed between the Fund and a Borrower, together with Agent Banks, are referred to as Intermediate Participants. |
R. | Collateral To the extent the Fund has designated or segregated a security as collateral and that security is subsequently sold, it is the Funds practice to replace such collateral no later than the next business day. |
NOTE 2Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the Adviser or Invesco). Under the terms of the investment advisory agreement, the Fund accrues daily and pays monthly an advisory fee to the Adviser based on the annual rate of the Funds average daily net assets as follows:
Average Daily Net Assets | Rate | |||||||
First $200 million |
0 | .625% | ||||||
Next $300 million |
0 | .55% | ||||||
Next $500 million |
0 | .50% | ||||||
Over $1 billion |
0 | .45% |
For the year ended December 31, 2017, the effective advisory fees incurred by the Fund was 0.625%.
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. and separate sub-advisory agreements with Invesco PowerShares Capital Management LLC and Invesco Asset Management (India) Private Limited (collectively, the Affiliated Sub-Advisers) the Adviser, not the Fund, will pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2018, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Series I shares to 1.50% and Series II shares to 1.75% of average daily net assets (the expense limits). In determining the Advisers obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual
Invesco V.I. High Yield Fund
fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on June 30, 2018. During its term, the fee waiver agreement cannot be terminated or amended to increase expense limits or reduce the advisory fee waiver without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
Further, the Adviser has contractually agreed, through at least June 30, 2019, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the year ended December 31, 2017, the Adviser waived advisory fees of $16,777.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco a fee for costs incurred in providing accounting services and fund administrative services to the Fund and to reimburse Invesco for fees paid to insurance companies that have agreed to provide certain administrative services to the Fund. These administrative services provided by the insurance companies may include, among other things: maintenance of master accounts with the Fund; tracking, recording and transmitting net purchase and redemption orders for Fund shares; maintaining and preserving records related to the purchase, redemption and other account activity of variable product owners; distributing copies of Fund documents such as prospectuses, proxy materials and periodic reports, to variable product owners, and responding to inquiries from variable product owners about the Fund. Pursuant to such agreement, for the year ended December 31, 2017, Invesco was paid $50,000 for accounting and fund administrative services and was reimbursed $279,719 for fees paid to insurance companies.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (IIS) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. For the year ended December 31, 2017, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
The Trust has entered into a master distribution agreement with Invesco Distributors, Inc. (IDI) to serve as the distributor for the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Funds Series II shares (the Plan). The Fund, pursuant to the Plan, pays IDI compensation at the annual rate of 0.25% of the Funds average daily net assets of Series II shares. The fees are accrued daily and paid monthly. Of the Plan payments, up to 0.25% of the average daily net assets of the Series II shares may be paid to insurance companies who furnish continuing personal shareholder services to customers who purchase and own Series II shares of the Fund. For the year ended December 31, 2017, expenses incurred under the Plan are detailed in the Statement of Operations as Distribution fees.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
NOTE 3Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investments assigned level:
Level 1 | Prices are determined using quoted prices in an active market for identical assets. |
Level 2 | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Level 3 | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Funds own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of December 31, 2017. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
Invesco V.I. High Yield Fund
The Funds policy is to recognize transfers in and out of the valuation levels as of the end of the reporting period. During the year ended December 31, 2017, there were no material transfers between valuation levels.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Investments in Securities | ||||||||||||||||
U.S. Dollar Denominated Bonds & Notes |
$ | | $ | 159,621,881 | $ | 0 | $ | 159,621,881 | ||||||||
Exchange-Traded Fund |
3,720,600 | | | 3,720,600 | ||||||||||||
Variable Rate Senior Loan Interests |
| 1,394,783 | 812,000 | 2,206,783 | ||||||||||||
Non-U.S. Dollar Denominated Bonds & Notes |
| 970,562 | | 970,562 | ||||||||||||
U.S. Treasury Securities |
| 369,611 | | 369,611 | ||||||||||||
Preferred Stock |
| 123,900 | | 123,900 | ||||||||||||
Common Stocks & Other Equity Interests |
9 | 987 | | 996 | ||||||||||||
Money Market Funds |
3,522,769 | | | 3,522,769 | ||||||||||||
Total Investments in Securities |
7,243,378 | 162,481,724 | 812,000 | 170,537,102 | ||||||||||||
Other Investments - Assets* | ||||||||||||||||
Swap Agreements |
| 166,249 | | 166,249 | ||||||||||||
Other Investments - Liabilities* | ||||||||||||||||
Forward Foreign Currency Contracts |
| (15,164 | ) | | (15,164 | ) | ||||||||||
Total Other Investments |
| 151,085 | | 151,085 | ||||||||||||
Total Investments |
$ | 7,243,378 | $ | 162,632,809 | $ | 812,000 | $ | 170,688,187 |
* | Unrealized appreciation (depreciation). |
NOTE 4Derivative Investments
The Fund may enter into an International Swaps and Derivatives Association Master Agreement (ISDA Master Agreement) under which a fund may trade OTC derivatives. An OTC transaction entered into under an ISDA Master Agreement typically involves a collateral posting arrangement, payment netting provisions and close-out netting provisions. These netting provisions allow for reduction of credit risk through netting of contractual obligations. The enforceability of the netting provisions of the ISDA Master Agreement depends on the governing law of the ISDA Master Agreement, among other factors.
For financial reporting purposes, the Fund does not offset OTC derivative assets or liabilities that are subject to ISDA Master Agreements in the Statement of Assets and Liabilities.
Value of Derivative Investments at Period-End
The table below summarizes the value of the Funds derivative investments, detailed by primary risk exposure, held as of December 31, 2017:
Value | ||||||||||||
Derivative Assets | Credit Risk |
Currency Risk |
Total | |||||||||
Unrealized appreciation on swap agreements Centrally Cleared(a) |
$ | 166,249 | $ | | $ | 166,249 | ||||||
Derivatives not subject to master netting agreements |
(166,249 | ) | | (166,249 | ) | |||||||
Total Derivative Assets subject to master netting agreements |
$ | | $ | | $ | | ||||||
Value | ||||||||||||
Derivative Liabilities | Credit Risk |
Currency Risk |
Total | |||||||||
Unrealized depreciation on forward foreign currency contracts outstanding |
$ | | $ | (15,164 | ) | $ | (15,164 | ) | ||||
Derivatives not subject to master netting agreements |
| | | |||||||||
Total Derivative Liabilities subject to master netting agreements |
$ | | $ | (15,164 | ) | $ | (15,164 | ) |
(a) | The daily variation margin receivable at period-end is recorded in the Statement of Assets and Liabilities. |
Invesco V.I. High Yield Fund
Offsetting Assets and Liabilities
The table below reflects the Funds exposure to Counterparties subject to either an ISDA Master Agreement or other agreement for OTC derivative transactions as of December 31, 2017.
Financial Derivative Assets |
Financial Derivative Liabilities |
Collateral (Received)/Pledged |
||||||||||||||||||||||
Counterparty | Forward Foreign Currency |
Forward Foreign Currency |
Net value of Derivatives |
Non-Cash | Cash | Net Amount |
||||||||||||||||||
Barclays Bank PLC |
$ | | $ | (15,164 | ) | $ | (15,164 | ) | $ | | $ | | $ | (15,164 | ) |
Effect of Derivative Investments for the year ended December 31, 2017
The table below summarizes the gains (losses) on derivative investments, detailed by primary risk exposure, recognized in earnings during the period:
Location of Gain (Loss) on Statement of Operations |
||||||||||||||||
Credit Risk |
Currency Risk |
Interest Rate Risk |
Total | |||||||||||||
Realized Gain (Loss): |
||||||||||||||||
Forward foreign currency contracts |
$ | | $ | (110,931 | ) | $ | | $ | (110,931 | ) | ||||||
Futures contracts |
| | (413,456 | ) | (413,456 | ) | ||||||||||
Swap agreements |
125,387 | | | 125,387 | ||||||||||||
Change in Net Unrealized Appreciation (Depreciation): |
||||||||||||||||
Forward foreign currency contracts |
| (23,828 | ) | | (23,828 | ) | ||||||||||
Futures contracts |
| | 24,152 | 24,152 | ||||||||||||
Swap agreements |
166,249 | | | 166,249 | ||||||||||||
Total |
$ | 291,636 | $ | (134,759 | ) | $ | (389,304 | ) | $ | (232,427 | ) |
The table below summarizes the twelve month average notional value of forward foreign currency contracts, the four month average notional value of futures contracts and the nine month average notional value of swap agreements outstanding during the period.
Forward Foreign Currency Contracts |
Futures Contracts |
Swap Agreements |
||||||||||
Average notional value |
$ | 1,557,263 | $ | 11,305,758 | $ | 6,662,556 |
NOTE 5Investments in Affiliates
The Funds Adviser and the adviser for PowerShares Senior Loan Portfolio are subsidiaries of Invesco Ltd. and therefore, PowerShares Senior Loan Portfolio is considered to be affiliated with the Fund. The following is a summary of the transactions in, and earnings from, investments in PowerShares Senior Loan Portfolio for the year ended December 31, 2017.
Value 12/31/16 |
Purchases at Cost |
Proceeds from Sales |
Change in Unrealized Appreciation (Depreciation) |
Realized Gain (Loss) |
Value 12/31/17 |
Dividend Income |
||||||||||||||||||||||
PowerShares Senior Loan Portfolio |
$ | 1,868,800 | $ | 1,167,000 | $ | (3,018,690 | ) | $ | (13,832 | ) | $ | (3,278 | ) | $ | | $ | 42,615 |
NOTE 6Trustees and Officers Fees and Benefits
Trustees and Officers Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees and Officers Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees were eligible to participate in a retirement plan that provided for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees and Officers Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 7Cash Balances
The Fund may borrow for leveraging in an amount up to 5% of the Funds total assets (excluding the amount borrowed) at the time the borrowing is made. In doing so, the Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank
Invesco V.I. High Yield Fund
at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate. The Fund may not purchase additional securities when any borrowings from banks exceed 5% of the Funds total assets.
NOTE 8Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended December 31, 2017 and 2016:
2017 | 2016 | |||||||
Ordinary income |
$ | 8,003,303 | $ | 7,202,263 |
Tax Components of Net Assets at Period-End:
2017 | ||||
Undistributed ordinary income |
$ | 8,681,610 | ||
Net unrealized appreciation (depreciation) investments |
(3,442,953 | ) | ||
Net unrealized appreciation foreign currencies |
10,306 | |||
Temporary book/tax differences |
(71,694 | ) | ||
Capital loss carryforward |
(10,505,247 | ) | ||
Shares of beneficial interest |
177,501,503 | |||
Total net assets |
$ | 172,173,525 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Funds net unrealized appreciation (depreciation) difference is attributable primarily to wash sales and forward foreign currency contracts.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Funds temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund has a capital loss carryforward as of December 31, 2017, which expires as follows:
Capital Loss Carryforward* | ||||||||||||
Expiration | Short-Term | Long-Term | Total | |||||||||
Not subject to expiration |
$ | 4,402,615 | $ | 6,102,632 | $ | 10,505,247 |
* | Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code and may be further limited depending upon a variety of factors, including the realization of net unrealized gains or losses as of the date of any reorganization. |
NOTE 9Investment Transactions
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended December 31, 2017 was $130,050,537 and $133,350,219, respectively. Cost of investments, including any derivatives, on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investments on a Tax Basis | ||||
Aggregate unrealized appreciation of investments |
$ | 5,458,351 | ||
Aggregate unrealized (depreciation) of investments |
(8,901,304 | ) | ||
Net unrealized appreciation (depreciation) of investments |
$ | (3,442,953 | ) |
Cost of investments for tax purposes is $174,572,731.
Invesco V.I. High Yield Fund
Note 10Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of expired capital loss carryforward and swap agreements income on December 31, 2017, undistributed net investment income was increased by $152,793, undistributed net realized gain (loss) was increased by $3,099,154 and shares of beneficial interest was decreased by $3,251,947. This reclassification had no effect on the net assets of the Fund.
NOTE 11Share Information
Summary of Share Activity | ||||||||||||||||
Years ended December 31, | ||||||||||||||||
2017(a) | 2016 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: |
||||||||||||||||
Series I |
11,501,884 | $ | 63,906,862 | 17,324,848 | $ | 92,655,603 | ||||||||||
Series II |
2,531,262 | 13,924,938 | 4,567,922 | 24,054,376 | ||||||||||||
Issued as reinvestment of dividends: |
||||||||||||||||
Series I |
829,113 | 4,535,246 | 774,024 | 4,133,290 | ||||||||||||
Series II |
637,511 | 3,468,057 | 577,961 | 3,068,973 | ||||||||||||
Reacquired: |
||||||||||||||||
Series I |
(15,263,276 | ) | (84,022,570 | ) | (15,111,083 | ) | (80,468,968 | ) | ||||||||
Series II |
(1,841,220 | ) | (10,117,237 | ) | (3,757,906 | ) | (19,637,523 | ) | ||||||||
Net increase (decrease) in share activity |
(1,604,726 | ) | $ | (8,304,704 | ) | 4,375,766 | $ | 23,805,751 |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 68% of the outstanding shares of the Fund. The Fund and the Funds principal underwriter or adviser, are parties to participation agreements with these entities whereby these entities sell units of interest in separate accounts funding variable products that are invested in the Fund. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
NOTE 12Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Net asset value, beginning of period |
Net investment income(a) |
Net gains (losses) on securities (both realized and unrealized) |
Total from investment operations |
Dividends from net investment income |
Net asset value, end of period |
Total return(b) |
Net assets, end of period (000s omitted) |
Ratio of expenses to average net assets with fee waivers and/or expenses absorbed |
Ratio of expenses to average net assets without fee waivers and/or expenses absorbed |
Ratio of net investment income to average net assets |
Portfolio turnover(c) |
|||||||||||||||||||||||||||||||||||||
Series I |
||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/17 |
$ | 5.40 | $ | 0.26 | $ | 0.08 | $ | 0.34 | $ | (0.23 | ) | $ | 5.51 | 6.30 | % | $ | 80,372 | 0.99 | %(d) | 1.00 | %(d) | 4.73 | %(d) | 73 | % | |||||||||||||||||||||||
Year ended 12/31/16 |
5.06 | 0.28 | 0.28 | 0.56 | (0.22 | ) | 5.40 | 11.21 | 94,653 | 0.96 | 0.96 | 5.25 | 99 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/15 |
5.53 | 0.29 | (0.46 | ) | (0.17 | ) | (0.30 | ) | 5.06 | (3.17 | ) | 73,594 | 1.03 | 1.03 | 5.23 | 99 | ||||||||||||||||||||||||||||||||
Year ended 12/31/14 |
5.70 | 0.29 | (0.19 | ) | 0.10 | (0.27 | ) | 5.53 | 1.73 | 94,345 | 0.92 | 0.98 | 5.11 | 103 | ||||||||||||||||||||||||||||||||||
Year ended 12/31/13 |
5.61 | 0.33 | 0.05 | 0.38 | (0.29 | ) | 5.70 | 7.01 | 98,455 | 0.81 | 1.03 | 5.79 | 74 | |||||||||||||||||||||||||||||||||||
Series II |
||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/17 |
5.36 | 0.25 | 0.07 | 0.32 | (0.22 | ) | 5.46 | 5.93 | 91,802 | 1.24 | (d) | 1.25 | (d) | 4.48 | (d) | 73 | ||||||||||||||||||||||||||||||||
Year ended 12/31/16 |
5.03 | 0.26 | 0.28 | 0.54 | (0.21 | ) | 5.36 | 10.83 | 82,971 | 1.21 | 1.21 | 5.00 | 99 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/15 |
5.50 | 0.27 | (0.45 | ) | (0.18 | ) | (0.29 | ) | 5.03 | (3.37 | ) | 70,840 | 1.28 | 1.28 | 4.98 | 99 | ||||||||||||||||||||||||||||||||
Year ended 12/31/14 |
5.67 | 0.28 | (0.19 | ) | 0.09 | (0.26 | ) | 5.50 | 1.59 | 59,683 | 1.17 | 1.23 | 4.86 | 103 | ||||||||||||||||||||||||||||||||||
Year ended 12/31/13 |
5.59 | 0.32 | 0.05 | 0.37 | (0.29 | ) | 5.67 | 6.76 | 44,416 | 1.06 | 1.28 | 5.54 | 74 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year, if applicable, and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns. |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. For the period ended December 31, 2013, the portfolio turnover calculation excludes the value of securities purchased of $32,385,318 and sold of $10,521,731 in the effort to realign the Funds portfolio holdings after the reorganization of Invesco V.I. High Yield Securities Fund into the Fund. |
(d) | Ratios are based on average daily net assets (000s omitted) of $98,741 and $88,178 for Series I and Series II shares, respectively. |
Invesco V.I. High Yield Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) and Shareholders of Invesco V.I. High Yield Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Invesco V.I. High Yield Fund (one of the funds constituting AIM Variable Insurance Funds (Invesco Variable Insurance Funds), hereafter referred to as the Fund) as of December 31, 2017, the related statement of operations for the year ended December 31, 2017, the statement of changes in net assets for each of the two years in the period ended December 31, 2017, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2017 (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2017 and the financial highlights for each of the five years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Funds management. Our responsibility is to express an opinion on the Funds financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2017 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, TX
February 14, 2018
We have served as the auditor of one or more of the investment companies in the Invesco/PowerShares group of investment companies since at least 1995. We have not determined the specific year we began serving as such auditor.
Invesco V.I. High Yield Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period July 1, 2017 through December 31, 2017.
The actual and hypothetical expenses in the examples below do not represent the effect of any fees or other expenses assessed in connection with a variable product; if they did, the expenses shown would be higher while the ending account values shown would be lower.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled Actual Expenses Paid During Period to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Funds actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs. Therefore, the hypothetical information is useful in comparing ongoing costs, and will not help you determine the relative total costs of owning different funds.
Class | Beginning Account Value (07/01/17) |
ACTUAL | HYPOTHETICAL (5% annual return before expenses) |
Annualized Expense Ratio |
||||||||||||||||||||
Ending Account Value (12/31/17)1 |
Expenses Paid During Period2 |
Ending Account Value (12/31/17) |
Expenses Paid During Period2 |
|||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 1,021.40 | $ | 5.81 | $ | 1,019.46 | $ | 5.80 | 1.14 | % | ||||||||||||
Series II | 1,000.00 | 1,021.20 | 7.08 | 1,018.20 | 7.07 | 1.39 |
1 | The actual ending account value is based on the actual total return of the Fund for the period July 1, 2017 through December 31, 2017, after actual expenses and will differ from the hypothetical ending account value which is based on the Funds expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Funds annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half year. |
Invesco V.I. High Yield Fund
Tax Information
Form 1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific states requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended December 31, 2017:
Federal and State Income Tax |
||||
Corporate Dividends Received Deduction* |
0.34 | % | ||
U.S. Treasury Obligations* |
0.03 | % |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Funds fiscal year. |
Invesco V.I. High Yield Fund
Trustees and Officers
The address of each trustee and officer is AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Trust), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trusts organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 1960 Trustee |
2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business
Formerly: Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US), Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) |
158 | None | ||||
Philip A. Taylor2 1954 Trustee and Senior Vice President |
2006 | Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco Aim Management Group, Inc.) (financial services holding company); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.) (registered transfer agent); Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company); Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management).
Formerly: Co-Chairman, Co-President and Co-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chief Executive Officer and President, Van Kampen Exchange Corp; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurers Series Trust (Invesco Treasurers Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurers Series Trust (Invesco Treasurers Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) (registered broker dealer); Manager, Invesco PowerShares Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco Aim Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurers Series Trust (Invesco Treasurers Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. |
158 | None |
1 | Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser. |
2 | Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser. |
Invesco V.I. High Yield Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Independent Trustees | ||||||||
Bruce L. Crockett 1944 Trustee and Chair |
1993 | Chairman, Crockett Technologies Associates (technology consulting company)
Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute: Member of the Audit Committee, Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council |
158 | Director and Chairman of the Audit Committee, ALPS (Attorneys Liability Protection Society) (insurance company); Director and Member of the Audit Committee and Compensation Committee, Ferroglobe PLC (metallurgical company) | ||||
David C. Arch 1945 Trustee |
2010 | Chairman of Blistex Inc. (consumer health care products manufacturer); Member, World Presidents Organization | 158 | Board member of the Illinois Manufacturers Association | ||||
Jack M. Fields 1952 Trustee |
1997 | Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Chairman, Discovery Learning Alliance (non-profit)
Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff) (human resources provider); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives |
158 | None | ||||
Cynthia Hostetler 1962 Trustee |
2017 | Non-Executive Director and Trustee of a number of public and private business corporations
Formerly: Head of Investment Funds and Private Equity, Overseas Private Investment Corporation; President, First Manhattan Bancorporation, Inc.; Attorney, Simpson Thacher & Bartlett LLP |
158 | Vulcan Materials Company (construction materials company); Trilinc Global Impact Fund; Aberdeen Investment Funds (4 portfolios); Artio Global Investment LLC (mutual fund complex); Edgen Group, Inc. (specialized energy and infrastructure products distributor) | ||||
Eli Jones 1961 Trustee |
2016 | Professor and Dean, Mays Business School Texas A&M University
Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University; Director, Arvest Bank |
158 | Insperity, Inc. (formerly known as Administaff) (human resources provider) | ||||
Prema Mathai-Davis 1950 Trustee |
1998 | Retired. | 158 | None | ||||
Teresa M. Ressel 1962 Trustee |
2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Chief Financial Officer, Olayan America, The Olayan Group (international investor/commercial/industrial); Chief Executive Officer, UBS Securities LLC; Group Chief Operating Officer, Americas, UBS AG; Assistant Secretary for Management & Budget and CFO, US Department of the Treasury |
158 | Atlantic Power Corporation (power generation company); ON Semiconductor Corp. (semiconductor supplier) | ||||
Ann Barnett Stern 1957 Trustee |
2017 | President and Chief Executive Officer, Houston Endowment Inc. (private philanthropic institution)
Formerly: Executive Vice President and General Counsel, Texas Childrens Hospital; Attorney, Beck, Redden and Secrest, LLP; Business Law Instructor, University of St. Thomas; Attorney, Andrews & Kurth LLP |
158 | Federal Reserve Bank of Dallas | ||||
Raymond Stickel, Jr. 1944 Trustee |
2005 | Retired.
Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios); Partner, Deloitte & Touche |
158 | None | ||||
Robert C. Troccoli 1949 Trustee |
2016 | Adjunct Professor, University of Denver Daniels College of Business
Formerly: Senior Partner, KPMG LLP |
158 | None | ||||
Christopher L. Wilson 1957 Trustee |
2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Managing Partner, CT2, LLC (investing and consulting firm); President/Chief Executive Officer, Columbia Funds, Bank of America Corporation; President/Chief Executive Officer, CDC IXIS Asset Management Services, Inc.; Principal & Director of Operations, Scudder Funds, Scudder, Stevens & Clark, Inc.; Assistant Vice President, Fidelity Investments |
158 | TD Asset Management USA Inc. (mutual fund complex) (22 portfolios); ISO New England, Inc. (non-profit organization managing regional electricity market) |
Invesco V.I. High Yield Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers | ||||||||
Sheri Morris 1964 President, Principal Executive Officer and Treasurer |
1999 | President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco Aim Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; and Treasurer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust and PowerShares Actively Managed Exchange-Traded Fund Trust |
N/A | N/A | ||||
Russell C. Burk 1958 Senior Vice President and Senior Officer |
2005 | Senior Vice President and Senior Officer, The Invesco Funds | N/A | N/A | ||||
John M. Zerr 1962 Senior Vice President, Chief Legal Officer and Secretary |
2006 | Director, Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Managing Director, Invesco PowerShares Capital Management LLC; Director, Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust; Manager and Secretary, Invesco Indexing LLC
Formerly: Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser); Vice President and Secretary, PBHG Funds (an investment company) and PBHG Insurance Series Fund (an investment company); Chief Operating Officer, General Counsel and Secretary, Old Mutual Investment Partners (a broker-dealer); General Counsel and Secretary, Old Mutual Fund Services (an administrator) and Old Mutual Shareholder Services (a shareholder servicing center); Executive Vice President, General Counsel and Secretary, Old Mutual Capital, Inc. (an investment adviser); and Vice President and Secretary, Old Mutual Advisors Funds (an investment company) |
N/A | N/A | ||||
Gregory G. McGreevey 1962 Senior Vice President |
2012 | Senior Managing Director, Invesco Ltd.; Director, Chairman, President, and Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President, Invesco Management Group, Inc.; Director, Invesco Mortgage Capital, Inc. and Invesco Senior Secured Management, Inc.; and Senior Vice President, The Invesco Funds
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A | ||||
Kelli Gallegos 1970 Vice President, Principal Financial Officer and Assistant Treasurer |
2008 | Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A |
Invesco V.I. High Yield Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers(continued) | ||||||||
Tracy Sullivan 1962 Vice President, Chief Tax Officer and Assistant Treasurer |
2008 | Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A | ||||
Crissie M. Wisdom 1969 Anti-Money Laundering Compliance Officer |
2013 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., Invesco Management Group, Inc., The Invesco Funds, and PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp. |
N/A | N/A | ||||
Robert R. Leveille 1969 Chief Compliance Officer |
2016 | Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds
Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds |
N/A | N/A |
The Statement of Additional Information of the Trust includes additional information about the Funds Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Funds Statement of Additional Information for information on the Funds sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 |
Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Auditors PricewaterhouseCoopers LLP 1000 Louisiana Street, Suite 5800 Houston, TX 77002-5678 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2005 Market Street, Suite 2600 Philadelphia, PA 19103-7018 |
Counsel to the Independent Trustees Goodwin Procter LLP 901 New York Avenue, N.W. Washington, D.C. 20001 |
Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
Invesco V.I. High Yield Fund
| ||||
Annual Report to Shareholders
|
December 31, 2017 | |||
| ||||
Invesco V.I. International Growth Fund
|
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Funds semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The Funds Form N-Q filings are available on the SEC website, sec.gov. Copies of the Funds Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-07452 and 033-57340. The Funds most recent portfolio holdings, as filed on Form N-Q, have also been made available to insurance companies issuing variable annuity contracts and variable life insurance policies (variable products) that invest in the Fund. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/ proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
This report must be accompanied or preceded by a currently effective Fund prospectus and variable product prospectus, which contain more complete information, including sales charges and expenses. Investors should read each carefully before investing.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE | ||
Invesco Distributors, Inc. VIIGR-AR-1 02082018 1223 |
Managements Discussion of Fund Performance
Invesco V.I. International Growth Fund
Invesco V.I. International Growth Fund
Your Funds Long-Term Performance
Results of a $10,000 Investment Oldest Share Class(es)
Fund and index data from 12/31/07
1 | Source: Lipper Inc. |
2 | Source(s): Invesco, FactSet Research Systems Inc. |
3 | Source: FactSet Research Systems Inc. |
Past performance cannot guarantee
comparable future results.
Invesco V.I. International Growth Fund
Invesco V.I. International Growth Funds investment objective is long-term growth of capital.
∎ | Unless otherwise stated, information presented in this report is as of December 31, 2017, and is based on total net assets. |
∎ | Unless otherwise noted, all data provided by Invesco. |
Invesco V.I. International Growth Fund
Invesco V.I. International Growth Fund
Schedule of Investments
December 31, 2017
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. International Growth Fund
Investment Abbreviations:
ADR | American Depositary Receipt | |
NVDR | Non-Voting Depositary Receipt |
Notes to Schedule of Investments:
(a) | Non-income producing security. |
(b) | The money market fund and the Fund are affiliated by having the same investment adviser. The rate shown is the 7-day SEC standardized yield as of December 31, 2017. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. International Growth Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. International Growth Fund
Statement of Changes in Net Assets
For the years ended December 31, 2017 and 2016
2017 | 2016 | |||||||
Operations: |
||||||||
Net investment income |
$ | 22,677,714 | $ | 23,189,171 | ||||
Net realized gain (loss) |
63,556,696 | (1,173,971 | ) | |||||
Change in net unrealized appreciation (depreciation) |
307,045,299 | (36,501,234 | ) | |||||
Net increase (decrease) in net assets resulting from operations |
393,279,709 | (14,486,034 | ) | |||||
Distributions to shareholders from net investment income: |
||||||||
Series I |
(8,599,101 | ) | (7,627,878 | ) | ||||
Series ll |
(17,155,517 | ) | (14,078,193 | ) | ||||
Total distributions from net investment income |
(25,754,618 | ) | (21,706,071 | ) | ||||
Share transactionsnet: |
||||||||
Series l |
(25,091,564 | ) | (51,402,690 | ) | ||||
Series ll |
25,903,929 | 24,291,791 | ||||||
Net increase (decrease) in net assets resulting from share transactions |
812,365 | (27,110,899 | ) | |||||
Net increase (decrease) in net assets |
368,337,456 | (63,303,004 | ) | |||||
Net assets: |
||||||||
Beginning of year |
1,708,280,232 | 1,771,583,236 | ||||||
End of year (includes undistributed net investment income of $9,782,789 and $12,559,820, respectively) |
$ | 2,076,617,688 | $ | 1,708,280,232 |
Notes to Financial Statements
December 31, 2017
NOTE 1Significant Accounting Policies
Invesco V.I. International Growth Fund (the Fund) is a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Trust). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end series management investment company consisting of twenty-four separate portfolios, (each constituting a Fund). The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each Fund or class will be voted on exclusively by the shareholders of such Fund or class. Current Securities and Exchange Commission (SEC) guidance, however, requires participating insurance companies offering separate accounts to vote shares proportionally in accordance with the instructions of the contract owners whose investments are funded by shares of each Fund or class.
The Funds investment objective is long-term growth of capital.
The Fund currently offers two classes of shares, Series I and Series II, both of which are offered to insurance company separate accounts funding variable annuity contracts and variable life insurance policies (variable products).
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946, Financial Services Investment Companies.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations Securities, including restricted securities, are valued according to the following policy. |
A security listed or traded on an exchange (except convertible securities) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and asked prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and asked prices. For purposes of determining net asset value (NAV) per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (NYSE).
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end-of-day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
Debt obligations (including convertible securities) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual trading characteristics and other market data. Pricing services generally value debt obligations assuming orderly transactions of institutional
Invesco V.I. International Growth Fund
round lot size, but a fund may hold or transact in the same securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Foreign securities (including foreign exchange contracts) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that the investment adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trusts officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/asked quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a securitys fair value.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuers assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
B. | Securities Transactions and Investment Income Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any) is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Funds net asset value and, accordingly, they reduce the Funds total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and the Statement of Changes in Net Assets, or the net investment income per share and the ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. | Country Determination For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuers securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
D. | Distributions Distributions from net investment income and net realized capital gain, if any, are generally declared and paid to separate accounts of participating insurance companies annually and recorded on the ex-dividend date. |
E. | Federal Income Taxes The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the Internal Revenue Code), necessary to qualify as a regulated investment company and to distribute substantially all of the Funds taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. |
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Funds uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
Invesco V.I. International Growth Fund
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
F. | Expenses Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
G. | Accounting Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
H. | Indemnifications Under the Trusts organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Funds servicing agreements, that contain a variety of indemnification clauses. The Funds maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
I. | Foreign Currency Translations Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Funds books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. |
The Fund may invest in foreign securities, which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests and are shown in the Statement of Operations.
J. | Forward Foreign Currency Contracts The Fund may engage in foreign currency transactions either on a spot (i.e. for prompt delivery and settlement) basis, or through forward foreign currency contracts, to manage or minimize currency or exchange rate risk. |
The Fund may also enter into forward foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to lock in the U.S. dollar price of that security, or the Fund may also enter into forward foreign currency contracts that do not provide for physical settlement of the two currencies, but instead are settled by a single cash payment calculated as the difference between the agreed upon exchange rate and the spot rate at settlement based upon an agreed upon notional amount (non-deliverable forwards). The Fund will set aside liquid assets in an amount equal to the daily mark-to-market obligation for forward foreign currency contracts.
A forward foreign currency contract is an obligation between two parties (Counterparties) to purchase or sell a specific currency for an agreed-upon price at a future date. The use of forward foreign currency contracts does not eliminate fluctuations in the price of the underlying securities the Fund owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statement of Operations. The primary risks associated with forward foreign currency contracts include failure of the Counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities.
NOTE 2Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the Adviser or Invesco). Under the terms of the investment advisory agreement, the Fund accrues daily and pays monthly an advisory fee to the Adviser based on the annual rate of the Funds average daily net assets as follows:
Average Daily Net Assets | Rate | |||
First $250 million |
0.75% | |||
Over $250 million |
0.70% |
For the year ended December 31, 2017, the effective advisory fees incurred by the Fund was 0.71%.
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. and separate sub-advisory agreements with Invesco PowerShares Capital Management LLC and Invesco Asset Management (India) Private Limited (collectively, the Affiliated Sub-Advisers) the Adviser, not the Fund, will pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2018, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed
Invesco V.I. International Growth Fund
below) of Series I shares to 2.25% and Series II shares to 2.50% of average daily net assets (the expense limits). In determining the Advisers obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on June 30, 2018. During its term, the fee waiver agreement cannot be terminated or amended to increase expense limits or reduce the advisory fee waiver without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
Further, the Adviser has contractually agreed, through at least June 30, 2019, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the year ended December 31, 2017, the Adviser waived advisory fees of $167,752.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco a fee for costs incurred in providing accounting services and fund administrative services to the Fund and to reimburse Invesco for fees paid to insurance companies that have agreed to provide certain administrative services to the Fund. These administrative services provided by the insurance companies may include, among other things: maintenance of master accounts with the Fund; tracking, recording and transmitting net purchase and redemption orders for Fund shares; maintaining and preserving records related to the purchase, redemption and other account activity of variable product owners; distributing copies of Fund documents such as prospectuses, proxy materials and periodic reports, to variable product owners, and responding to inquiries from variable product owners about the Fund. Pursuant to such agreement, for the year ended December 31, 2017, Invesco was paid $408,375 for accounting and fund administrative services and was reimbursed $2,912,260 for fees paid to insurance companies.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (IIS) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. For the year ended December 31, 2017, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
The Trust has entered into a master distribution agreement with Invesco Distributors, Inc. (IDI) to serve as the distributor for the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Funds Series II shares (the Plan). The Fund, pursuant to the Plan, pays IDI compensation at the annual rate of 0.25% of the Funds average daily net assets of Series II shares. The fees are accrued daily and paid monthly. Of the Plan payments, up to 0.25% of the average daily net assets of the Series II shares may be paid to insurance companies who furnish continuing personal shareholder services to customers who purchase and own Series II shares of the Fund. For the year ended December 31, 2017, expenses incurred under the Plan are detailed in the Statement of Operations as Distribution fees.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
NOTE 3Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investments assigned level:
Level 1 | Prices are determined using quoted prices in an active market for identical assets. |
Level 2 | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Level 3 | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Funds own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of December 31, 2017. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
The Funds policy is to recognize transfers in and out of the valuation levels as of the end of the reporting period.
Invesco V.I. International Growth Fund
During the year ended December 31, 2017, there were transfers from Level 1 to Level 2 of $230,281,487 and from Level 2 to Level 1 of $209,646,165, due to foreign fair value adjustments.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Investments in Securities | ||||||||||||||||
Australia |
$ | | $ | 98,262,875 | $ | | $ | 98,262,875 | ||||||||
Brazil |
94,887,024 | 32,848,135 | | 127,735,159 | ||||||||||||
Canada |
178,890,408 | | | 178,890,408 | ||||||||||||
China |
47,145,730 | | | 47,145,730 | ||||||||||||
Denmark |
| 40,506,405 | | 40,506,405 | ||||||||||||
France |
64,734,882 | 63,963,550 | | 128,698,432 | ||||||||||||
Germany |
60,167,883 | 157,519,510 | | 217,687,393 | ||||||||||||
Hong Kong |
44,753,509 | 29,962,461 | | 74,715,970 | ||||||||||||
Italy |
| 37,346,742 | | 37,346,742 | ||||||||||||
Japan |
80,982,255 | 13,122,175 | | 94,104,430 | ||||||||||||
Mexico |
41,418,727 | | | 41,418,727 | ||||||||||||
Netherlands |
| 54,316,648 | | 54,316,648 | ||||||||||||
Singapore |
| 36,425,163 | | 36,425,163 | ||||||||||||
South Korea |
46,489,657 | 22,422,486 | | 68,912,143 | ||||||||||||
Spain |
| 35,971,457 | | 35,971,457 | ||||||||||||
Sweden |
| 41,857,224 | | 41,857,224 | ||||||||||||
Switzerland |
58,905,304 | 52,194,836 | | 111,100,140 | ||||||||||||
Taiwan |
44,193,256 | | | 44,193,256 | ||||||||||||
Thailand |
| 41,645,462 | | 41,645,462 | ||||||||||||
Turkey |
19,828,377 | | | 19,828,377 | ||||||||||||
United Kingdom |
44,222,038 | 296,284,975 | | 340,507,013 | ||||||||||||
United States |
52,535,536 | | | 52,535,536 | ||||||||||||
Money Market Funds |
142,587,976 | | | 142,587,976 | ||||||||||||
Total Investments |
$ | 1,021,742,562 | $ | 1,054,650,104 | $ | | $ | 2,076,392,666 |
NOTE 4Trustees and Officers Fees and Benefits
Trustees and Officers Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees and Officers Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees were eligible to participate in a retirement plan that provided for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees and Officers Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 5Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period-end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
Invesco V.I. International Growth Fund
NOTE 6Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended December 31, 2017 and 2016:
2017 | 2016 | |||||||
Ordinary income |
$ | 25,754,618 | $ | 21,706,071 |
Tax Components of Net Assets at Period-End:
2017 | ||||
Undistributed ordinary income |
$ | 31,709,530 | ||
Undistributed long-term gain |
11,420,956 | |||
Net unrealized appreciation investments |
582,512,532 | |||
Net unrealized appreciation foreign currencies |
86,015 | |||
Temporary book/tax differences |
(256,436 | ) | ||
Shares of beneficial interest |
1,451,145,091 | |||
Total net assets |
$ | 2,076,617,688 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Funds net unrealized appreciation difference is attributable primarily to wash sales and passive foreign investment companies.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Funds temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund does not have a capital loss carryforward as of December 31, 2017.
NOTE 7Investment Transactions
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended December 31, 2017 was $612,010,589 and $646,287,366, respectively. Cost of investments, including any derivatives, on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investments on a Tax Basis | ||||
Aggregate unrealized appreciation of investments |
$ | 597,001,652 | ||
Aggregate unrealized (depreciation) of investments |
(14,489,120 | ) | ||
Net unrealized appreciation of investments |
$ | 582,512,532 |
Cost of investments for tax purposes is $1,493,880,134.
NOTE 8Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of foreign currency transactions, on December 31, 2017, undistributed net investment income was increased by $299,873 and undistributed net realized gain (loss) was decreased by $299,873. This reclassification had no effect on the net assets of the Fund.
Invesco V.I. International Growth Fund
NOTE 9Share Information
Summary of Share Activity | ||||||||||||||||
Years ended December 31, | ||||||||||||||||
2017(a) | 2016 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: |
||||||||||||||||
Series I |
2,055,141 | $ | 75,392,382 | 2,604,909 | $ | 86,162,855 | ||||||||||
Series II |
5,918,465 | 210,230,623 | 8,332,304 | 275,601,981 | ||||||||||||
Issued as reinvestment of dividends: |
||||||||||||||||
Series I |
220,254 | 8,521,626 | 219,998 | 7,587,737 | ||||||||||||
Series II |
449,451 | 17,155,517 | 413,456 | 14,078,193 | ||||||||||||
Reacquired: |
||||||||||||||||
Series I |
(2,968,744 | ) | (109,005,572 | ) | (4,361,304 | ) | (145,153,282 | ) | ||||||||
Series II |
(5,526,752 | ) | (201,482,211 | ) | (8,151,842 | ) | (265,388,383 | ) | ||||||||
Net increase (decrease) in share activity |
147,815 | $ | 812,365 | (942,479 | ) | $ | (27,110,899 | ) |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 30% of the outstanding shares of the Fund. The Fund and the Funds principal underwriter or adviser, are parties to participation agreements with these entities whereby these entities sell units of interest in separate accounts funding variable products that are invested in the Fund. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
NOTE 10Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Net asset value, beginning of period |
Net investment income(a) |
Net gains (losses) on securities (both realized and unrealized) |
Total from investment operations |
Dividends from net investment income |
Net asset value, end of period |
Total return(b) |
Net assets, end of period (000s omitted) |
Ratio of net assets |
Ratio of expenses to average net assets without fee waivers and/or expenses absorbed |
Ratio of net to average |
Portfolio turnover(c) |
|||||||||||||||||||||||||||||||||||||
Series I |
||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/17 |
$ | 32.89 | $ | 0.49 | $ | 7.06 | $ | 7.55 | $ | (0.55 | ) | $ | 39.89 | 23.00 | % | $ | 627,894 | 0.92 | %(d) | 0.93 | %(d) | 1.34 | %(d) | 34 | % | |||||||||||||||||||||||
Year ended 12/31/16 |
33.49 | 0.50 | (0.63 | ) | (0.13 | ) | (0.47 | ) | 32.89 | (0.45 | ) | 540,460 | 0.95 | 0.96 | 1.51 | 18 | ||||||||||||||||||||||||||||||||
Year ended 12/31/15 |
34.87 | 0.48 | (1.33 | ) | (0.85 | ) | (0.53 | ) | 33.49 | (2.34 | ) | 601,760 | 1.00 | 1.01 | 1.35 | 22 | ||||||||||||||||||||||||||||||||
Year ended 12/31/14 |
35.32 | 0.56 | (0.44 | ) | 0.12 | (0.57 | ) | 34.87 | 0.33 | 647,530 | 1.01 | 1.02 | 1.58 | 26 | ||||||||||||||||||||||||||||||||||
Year ended 12/31/13 |
30.03 | 0.44 | 5.25 | 5.69 | (0.40 | ) | 35.32 | 19.01 | 686,305 | 1.01 | 1.02 | 1.37 | 24 | |||||||||||||||||||||||||||||||||||
Series II |
||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/17 |
32.44 | 0.40 | 6.96 | 7.36 | (0.47 | ) | 39.33 | 22.73 | 1,448,723 | 1.17 | (d) | 1.18 | (d) | 1.09 | (d) | 34 | ||||||||||||||||||||||||||||||||
Year ended 12/31/16 |
33.04 | 0.41 | (0.62 | ) | (0.21 | ) | (0.39 | ) | 32.44 | (0.70 | ) | 1,167,820 | 1.20 | 1.21 | 1.26 | 18 | ||||||||||||||||||||||||||||||||
Year ended 12/31/15 |
34.42 | 0.38 | (1.31 | ) | (0.93 | ) | (0.45 | ) | 33.04 | (2.61 | ) | 1,169,823 | 1.25 | 1.26 | 1.10 | 22 | ||||||||||||||||||||||||||||||||
Year ended 12/31/14 |
34.88 | 0.47 | (0.43 | ) | 0.04 | (0.50 | ) | 34.42 | 0.09 | 1,079,488 | 1.26 | 1.27 | 1.33 | 26 | ||||||||||||||||||||||||||||||||||
Year ended 12/31/13 |
29.68 | 0.36 | 5.18 | 5.54 | (0.34 | ) | 34.88 | 18.72 | 1,062,929 | 1.26 | 1.27 | 1.12 | 24 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year, if applicable, and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns. |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. |
(d) | Ratios are based on average daily net assets (000s omitted) of $593,441 and $1,355,595 for Series I and Series II shares, respectively. |
Invesco V.I. International Growth Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Variable Insurance Funds
(Invesco Variable Insurance Funds) and Shareholders of Invesco V.I. International Growth Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Invesco V.I. International Growth Fund (one of the funds constituting AIM Variable Insurance Funds (Invesco Variable Insurance Funds), hereafter referred to as the Fund) as of December 31, 2017, the related statement of operations for the year ended December 31, 2017, the statement of changes in net assets for each of the two years in the period ended December 31, 2017, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2017 (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2017 and the financial highlights for each of the five years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Funds management. Our responsibility is to express an opinion on the Funds financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2017 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, TX
February 14, 2018
We have served as the auditor of one or more of the investment companies in the Invesco/PowerShares group of investment companies since at least 1995. We have not determined the specific year we began serving as such auditor.
Invesco V.I. International Growth Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period July 1, 2017 through December 31, 2017.
The actual and hypothetical expenses in the examples below do not represent the effect of any fees or other expenses assessed in connection with a variable product; if they did, the expenses shown would be higher while the ending account values shown would be lower.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled Actual Expenses Paid During Period to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Funds actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs. Therefore, the hypothetical information is useful in comparing ongoing costs, and will not help you determine the relative total costs of owning different funds.
Class |
Beginning |
ACTUAL | HYPOTHETICAL (5% annual return before expenses) |
Annualized Ratio |
||||||||||||||||||||
Ending Account Value (12/31/17)1 |
Expenses Paid During Period2 |
Ending Account Value (12/31/17) |
Expenses Paid During Period2 |
|||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 1,076.80 | $ | 4.76 | $ | 1,020.62 | $ | 4.63 | 0.91 | % | ||||||||||||
Series II | 1,000.00 | 1,075.70 | 6.07 | 1,019.36 | 5.90 | 1.16 |
1 | The actual ending account value is based on the actual total return of the Fund for the period July 1, 2017 through December 31, 2017, after actual expenses and will differ from the hypothetical ending account value which is based on the Funds expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Funds annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half year. |
Invesco V.I. International Growth Fund
Tax Information
Form 1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific states requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended December 31, 2017:
Federal and State Income Tax |
||||
Corporate Dividends Received Deduction* |
0 | % | ||
U.S. Treasury Obligations* |
0 | % | ||
Foreign Taxes per share |
$ | 0.0683 | ||
Foreign Source Income per share |
$ | 0.8850 |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Funds fiscal year. |
Invesco V.I. International Growth Fund
Trustees and Officers
The address of each trustee and officer is AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Trust), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trusts organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 1960 Trustee |
2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business
Formerly: Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US), Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) |
158 | None | ||||
Philip A. Taylor2 1954 Trustee and Senior Vice President |
2006 | Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco Aim Management Group, Inc.) (financial services holding company); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.) (registered transfer agent); Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company); Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management).
Formerly: Co-Chairman, Co-President and Co-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chief Executive Officer and President, Van Kampen Exchange Corp; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurers Series Trust (Invesco Treasurers Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurers Series Trust (Invesco Treasurers Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) (registered broker dealer); Manager, Invesco PowerShares Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco Aim Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurers Series Trust (Invesco Treasurers Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. |
158 | None |
1 | Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser. |
2 | Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser. |
Invesco V.I. International Growth Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Independent Trustees | ||||||||
Bruce L. Crockett 1944 Trustee and Chair |
1993 | Chairman, Crockett Technologies Associates (technology consulting company)
Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute: Member of the Audit Committee, Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council |
158 | Director and Chairman of the Audit Committee, ALPS (Attorneys Liability Protection Society) (insurance company); Director and Member of the Audit Committee and Compensation Committee, Ferroglobe PLC (metallurgical company) | ||||
David C. Arch 1945 Trustee |
2010 | Chairman of Blistex Inc. (consumer health care products manufacturer); Member, World Presidents Organization | 158 | Board member of the Illinois Manufacturers Association | ||||
Jack M. Fields 1952 Trustee |
1997 | Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Chairman, Discovery Learning Alliance (non-profit)
Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff) (human resources provider); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives |
158 | None | ||||
Cynthia Hostetler 1962 Trustee |
2017 | Non-Executive Director and Trustee of a number of public and private business corporations
Formerly: Head of Investment Funds and Private Equity, Overseas Private Investment Corporation; President, First Manhattan Bancorporation, Inc.; Attorney, Simpson Thacher & Bartlett LLP |
158 | Vulcan Materials Company (construction materials company); Trilinc Global Impact Fund; Aberdeen Investment Funds (4 portfolios); Artio Global Investment LLC (mutual fund complex); Edgen Group, Inc. (specialized energy and infrastructure products distributor) | ||||
Eli Jones 1961 Trustee |
2016 | Professor and Dean, Mays Business School Texas A&M University
Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University; Director, Arvest Bank |
158 | Insperity, Inc. (formerly known as Administaff) (human resources provider) | ||||
Prema Mathai-Davis 1950 Trustee |
1998 | Retired. | 158 | None | ||||
Teresa M. Ressel 1962 Trustee |
2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Chief Financial Officer, Olayan America, The Olayan Group (international investor/commercial/industrial); Chief Executive Officer, UBS Securities LLC; Group Chief Operating Officer, Americas, UBS AG; Assistant Secretary for Management & Budget and CFO, US Department of the Treasury |
158 | Atlantic Power Corporation (power generation company); ON Semiconductor Corp. (semiconductor supplier) | ||||
Ann Barnett Stern 1957 Trustee |
2017 | President and Chief Executive Officer, Houston Endowment Inc. (private philanthropic institution)
Formerly: Executive Vice President and General Counsel, Texas Childrens Hospital; Attorney, Beck, Redden and Secrest, LLP; Business Law Instructor, University of St. Thomas; Attorney, Andrews & Kurth LLP |
158 | Federal Reserve Bank of Dallas | ||||
Raymond Stickel, Jr. 1944 Trustee |
2005 | Retired.
Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios); Partner, Deloitte & Touche |
158 | None | ||||
Robert C. Troccoli 1949 Trustee |
2016 | Adjunct Professor, University of Denver Daniels College of Business
Formerly: Senior Partner, KPMG LLP |
158 | None | ||||
Christopher L. Wilson 1957 Trustee |
2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Managing Partner, CT2, LLC (investing and consulting firm); President/Chief Executive Officer, Columbia Funds, Bank of America Corporation; President/Chief Executive Officer, CDC IXIS Asset Management Services, Inc.; Principal & Director of Operations, Scudder Funds, Scudder, Stevens & Clark, Inc.; Assistant Vice President, Fidelity Investments |
158 | TD Asset Management USA Inc. (mutual fund complex) (22 portfolios); ISO New England, Inc. (non-profit organization managing regional electricity market) |
Invesco V.I. International Growth Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers | ||||||||
Sheri Morris 1964 President, Principal Executive Officer and Treasurer |
1999 | President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco Aim Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; and Treasurer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust and PowerShares Actively Managed Exchange-Traded Fund Trust |
N/A | N/A | ||||
Russell C. Burk 1958 Senior Vice President and Senior Officer |
2005 | Senior Vice President and Senior Officer, The Invesco Funds | N/A | N/A | ||||
John M. Zerr 1962 Senior Vice President, Chief Legal Officer and Secretary |
2006 | Director, Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Managing Director, Invesco PowerShares Capital Management LLC; Director, Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust; Manager and Secretary, Invesco Indexing LLC
Formerly: Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser); Vice President and Secretary, PBHG Funds (an investment company) and PBHG Insurance Series Fund (an investment company); Chief Operating Officer, General Counsel and Secretary, Old Mutual Investment Partners (a broker-dealer); General Counsel and Secretary, Old Mutual Fund Services (an administrator) and Old Mutual Shareholder Services (a shareholder servicing center); Executive Vice President, General Counsel and Secretary, Old Mutual Capital, Inc. (an investment adviser); and Vice President and Secretary, Old Mutual Advisors Funds (an investment company) |
N/A | N/A | ||||
Gregory G. McGreevey 1962 Senior Vice President |
2012 | Senior Managing Director, Invesco Ltd.; Director, Chairman, President, and Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President, Invesco Management Group, Inc.; Director, Invesco Mortgage Capital, Inc. and Invesco Senior Secured Management, Inc.; and Senior Vice President, The Invesco Funds
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A | ||||
Kelli Gallegos 1970 Vice President, Principal Financial Officer and Assistant Treasurer |
2008 | Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A |
Invesco V.I. International Growth Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers(continued) | ||||||||
Tracy Sullivan 1962 Vice President, Chief Tax Officer and Assistant Treasurer |
2008 | Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A | ||||
Crissie M. Wisdom 1969 Anti-Money Laundering Compliance Officer |
2013 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., Invesco Management Group, Inc., The Invesco Funds, and PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp. |
N/A | N/A | ||||
Robert R. Leveille 1969 Chief Compliance Officer |
2016 | Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds
Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds |
N/A | N/A |
The Statement of Additional Information of the Trust includes additional information about the Funds Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Funds Statement of Additional Information for information on the Funds sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 |
Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Auditors PricewaterhouseCoopers LLP 1000 Louisiana Street, Suite 5800 Houston, TX 77002-5678 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2005 Market Street, Suite 2600 Philadelphia, PA 19103-7018 |
Counsel to the Independent Trustees Goodwin Procter LLP 901 New York Avenue, N.W. Washington, D.C. 20001 |
Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
Invesco V.I. International Growth Fund
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Annual Report to Shareholders
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December 31, 2017 | ||
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Invesco V.I. Managed Volatility Fund
|
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Funds semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The Funds Form N-Q filings are available on the SEC website, sec.gov. Copies of the Funds Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-07452 and 033-57340. The Funds most recent portfolio holdings, as filed on Form N-Q, have also been made available to insurance companies issuing variable annuity contracts and variable life insurance policies (variable products) that invest in the Fund. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/ proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
This report must be accompanied or preceded by a currently effective Fund prospectus and variable product prospectus, which contain more complete information, including sales charges and expenses. Investors should read each carefully before investing.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
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Invesco Distributors, Inc. I-VIMGV-AR-1 02082018 1421 |
Managements Discussion of Fund Performance
Invesco V.I. Managed Volatility Fund
Invesco V.I. Managed Volatility Fund
Your Funds Long-Term Performance
Results of a $10,000 Investment Oldest Share Class(es)
Fund and index data from 12/31/07
1 | Source: FactSet Research Systems Inc. |
2 | Source: Lipper Inc. |
Past performance cannot guarantee
comparable future results.
Invesco V.I. Managed Volatility Fund
Invesco V.I. Managed Volatility Funds investment objective is both capital appreciation and current income while managing portfolio volatility.
∎ | Unless otherwise stated, information presented in this report is as of December 31, 2017, and is based on total net assets. |
∎ | Unless otherwise noted, all data provided by Invesco. |
Invesco V.I. Managed Volatility Fund
Invesco V.I. Managed Volatility Fund
Schedule of Investments(a)
December 31, 2017
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Managed Volatility Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Managed Volatility Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Managed Volatility Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Managed Volatility Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Managed Volatility Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Managed Volatility Fund
Investment Abbreviations:
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poors. |
(b) | Non-income producing security. |
(c) | Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended (the 1933 Act). The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The aggregate value of these securities at December 31, 2017 was $2,317,038, which represented 5.09% of the Funds Net Assets. |
(d) | Security has an irrevocable call by the issuer or mandatory put by the holder. Maturity date reflects such call or put. |
(e) | Perpetual bond with no specified maturity date. |
(f) | The money market fund and the Fund are affiliated by having the same investment adviser. The rate shown is the 7-day SEC standardized yield as of December 31, 2017. |
Open Forward Foreign Currency Contracts | ||||||||||||||||||||||
Settlement
|
Counterparty |
Contract to | Unrealized Appreciation (Depreciation) |
|||||||||||||||||||
Deliver | Receive | |||||||||||||||||||||
01/19/2018 |
State Street Bank and Trust Co. |
USD | 3,517 | AUD | 4,586 | $ | 61 | |||||||||||||||
01/19/2018 |
State Street Bank and Trust Co. |
USD | 7,278 | CAD | 9,357 | 169 | ||||||||||||||||
01/19/2018 |
State Street Bank and Trust Co. |
USD | 5,593 | CHF | 5,490 | 50 | ||||||||||||||||
01/19/2018 |
State Street Bank and Trust Co. |
USD | 10,642 | EUR | 8,972 | 137 | ||||||||||||||||
01/19/2018 |
State Street Bank and Trust Co. | USD | 10,324 | GBP | 7,692 | 69 | ||||||||||||||||
Subtotal Appreciation |
486 | |||||||||||||||||||||
01/19/2018 |
Bank of New York Mellon (The) |
AUD | 108,499 | USD | 81,971 | (2,685 | ) | |||||||||||||||
01/19/2018 |
Bank of New York Mellon (The) |
CAD | 232,001 | USD | 180,265 | (4,378 | ) | |||||||||||||||
01/19/2018 |
Bank of New York Mellon (The) |
CHF | 132,251 | USD | 133,654 | (2,298 | ) | |||||||||||||||
01/19/2018 |
Bank of New York Mellon (The) |
EUR | 217,300 | USD | 255,828 | (5,236 | ) | |||||||||||||||
01/19/2018 |
Bank of New York Mellon (The) |
GBP | 354,761 | USD | 473,937 | (5,381 | ) | |||||||||||||||
01/19/2018 |
State Street Bank and Trust Co. |
AUD | 108,499 | USD | 82,002 | (2,654 | ) | |||||||||||||||
01/19/2018 |
State Street Bank and Trust Co. |
CAD | 232,016 | USD | 180,321 | (4,333 | ) | |||||||||||||||
01/19/2018 |
State Street Bank and Trust Co. |
CHF | 132,250 | USD | 133,653 | (2,299 | ) | |||||||||||||||
01/19/2018 |
State Street Bank and Trust Co. |
EUR | 217,300 | USD | 255,961 | (5,103 | ) | |||||||||||||||
01/19/2018 |
State Street Bank and Trust Co. | GBP | 354,763 | USD | 473,971 | (5,351 | ) | |||||||||||||||
Subtotal Depreciation |
(39,718 | ) | ||||||||||||||||||||
Total Forward Foreign Currency Contracts Currency Risk |
$ | (39,232 | ) |
Abbreviations:
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Managed Volatility Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Managed Volatility Fund
Statement of Changes in Net Assets
For the years ended December 31, 2017 and 2016
2017 | 2016 | |||||||
Operations: |
||||||||
Net investment income |
$ | 702,760 | $ | 625,840 | ||||
Net realized gain (loss) |
2,639,827 | (1,186,418 | ) | |||||
Change in net unrealized appreciation |
1,552,948 | 5,466,222 | ||||||
Net increase in net assets resulting from operations |
4,895,535 | 4,905,644 | ||||||
Distributions to shareholders from net investment income: |
||||||||
Series I |
(610,486 | ) | (906,262 | ) | ||||
Series ll |
(16,351 | ) | (22,509 | ) | ||||
Total distributions from net investment income |
(626,837 | ) | (928,771 | ) | ||||
Distributions to shareholders from net realized gains: |
||||||||
Series l |
| (1,460,269 | ) | |||||
Series ll |
| (42,846 | ) | |||||
Total distributions from net realized gains |
| (1,503,115 | ) | |||||
Share transactionsnet: |
||||||||
Series l |
(10,218,192 | ) | (4,579,259 | ) | ||||
Series ll |
(145,427 | ) | (110,167 | ) | ||||
Net increase (decrease) in net assets resulting from share transactions |
(10,363,619 | ) | (4,689,426 | ) | ||||
Net increase (decrease) in net assets |
(6,094,921 | ) | (2,215,668 | ) | ||||
Net assets: |
||||||||
Beginning of year |
51,645,079 | 53,860,747 | ||||||
End of year (includes undistributed net investment income of $579,917 and $420,045, respectively) |
$ | 45,550,158 | $ | 51,645,079 |
Notes to Financial Statements
December 31, 2017
NOTE 1Significant Accounting Policies
Invesco V.I. Managed Volatility Fund (the Fund) is a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Trust). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end series management investment company consisting of twenty-four separate portfolios, (each constituting a Fund). The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each Fund or class will be voted on exclusively by the shareholders of such Fund or class. Current Securities and Exchange Commission (SEC) guidance, however, requires participating insurance companies offering separate accounts to vote shares proportionally in accordance with the instructions of the contract owners whose investments are funded by shares of each Fund or class.
The Funds investment objective is both capital appreciation and current income while managing portfolio volatility.
The Fund currently offers two classes of shares, Series I and Series II, both of which are offered to insurance company separate accounts funding variable annuity contracts and variable life insurance policies (variable products).
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946, Financial Services Investment Companies.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations Securities, including restricted securities, are valued according to the following policy. |
A security listed or traded on an exchange (except convertible securities) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and asked prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and asked prices. For purposes of determining net asset value (NAV) per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (NYSE).
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end-of-day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
Invesco V.I. Managed Volatility Fund
Debt obligations (including convertible securities) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual trading characteristics and other market data. Pricing services generally value debt obligations assuming orderly transactions of institutional round lot size, but a fund may hold or transact in the same securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Foreign securities (including foreign exchange contracts) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that the investment adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trusts officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/asked quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a securitys fair value.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuers assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
B. | Securities Transactions and Investment Income Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any) is recorded on the accrual basis from settlement date. Bond premiums and discounts are amortized and/or accreted over the lives of the respective securities. Pay-in-kind interest income and non-cash dividend income received in the form of securities in-lieu of cash are recorded at the fair value of the securities received. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Funds net asset value and, accordingly, they reduce the Funds total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and the Statement of Changes in Net Assets, or the net investment income per share and the ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. | Country Determination For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuers securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
D. | Distributions Distributions from net investment income and net realized capital gain, if any, are generally declared and paid to separate accounts of participating insurance companies annually and recorded on the ex-dividend date. |
E. | Federal Income Taxes The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the Internal Revenue Code), necessary to qualify as a regulated investment company and to distribute substantially all of the Funds |
Invesco V.I. Managed Volatility Fund
taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. |
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Funds uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
F. | Expenses Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
G. | Accounting Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
H. | Indemnifications Under the Trusts organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Funds servicing agreements, that contain a variety of indemnification clauses. The Funds maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
I. | Foreign Currency Translations Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Funds books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. |
The Fund may invest in foreign securities, which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests and are shown in the Statement of Operations.
J. | Forward Foreign Currency Contracts The Fund may engage in foreign currency transactions either on a spot (i.e. for prompt delivery and settlement) basis, or through forward foreign currency contracts, to manage or minimize currency or exchange rate risk. |
The Fund may also enter into forward foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to lock in the U.S. dollar price of that security, or the Fund may also enter into forward foreign currency contracts that do not provide for physical settlement of the two currencies, but instead are settled by a single cash payment calculated as the difference between the agreed upon exchange rate and the spot rate at settlement based upon an agreed upon notional amount (non-deliverable forwards). The Fund will set aside liquid assets in an amount equal to the daily mark-to-market obligation for forward foreign currency contracts.
A forward foreign currency contract is an obligation between two parties (Counterparties) to purchase or sell a specific currency for an agreed-upon price at a future date. The use of forward foreign currency contracts does not eliminate fluctuations in the price of the underlying securities the Fund owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statement of Operations. The primary risks associated with forward foreign currency contracts include failure of the Counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities.
K. | Futures Contracts The Fund may enter into futures contracts to manage exposure to interest rate, equity and market price movements and/or currency risks. A futures contract is an agreement between Counterparties to purchase or sell a specified underlying security, currency or commodity (or delivery of a cash settlement price, in the case of an index future) for a fixed price at a future date. The Fund currently invests only in exchange-traded futures and they are standardized as to maturity date and underlying financial instrument. Initial margin deposits required upon entering into futures contracts are satisfied by the segregation of specific securities or cash as collateral at the futures commission merchant (broker). During the period the futures contracts are open, changes in the value of the contracts are recognized as unrealized gains or losses by recalculating the value of the contracts on a daily basis. Subsequent or variation margin payments are received or made depending upon whether unrealized gains or losses are incurred. These amounts are reflected as receivables or payables on the Statement of Assets and Liabilities. When the contracts are closed or expire, the Fund recognizes a realized gain or loss equal to the difference between the proceeds |
Invesco V.I. Managed Volatility Fund
from, or cost of, the closing transaction and the Funds basis in the contract. The net realized gain (loss) and the change in unrealized gain (loss) on futures contracts held during the period is included on the Statement of Operations. The primary risks associated with futures contracts are market risk and the absence of a liquid secondary market. If the Fund were unable to liquidate a futures contract and/or enter into an offsetting closing transaction, the Fund would continue to be subject to market risk with respect to the value of the contracts and continue to be required to maintain the margin deposits on the futures contracts. Futures contracts have minimal Counterparty risk since the exchanges clearinghouse, as Counterparty to all exchange-traded futures, guarantees the futures against default. Risks may exceed amounts recognized in the Statement of Assets and Liabilities. |
NOTE 2Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the Adviser or Invesco). Under the terms of the investment advisory agreement, the Fund accrues daily and pays monthly an advisory fee to the Adviser based on the annual rate of 0.60% of the Funds average daily net assets.
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. and separate sub-advisory agreements with Invesco PowerShares Capital Management LLC and Invesco Asset Management (India) Private Limited (collectively, the Affiliated Sub-Advisers) the Adviser, not the Fund, will pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2018, to waive advisory fees and/or reimburse expenses to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Series I shares to 2.00% and Series II shares to 2.25% of average daily net assets (the expense limits). In determining the Advisers obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on June 30, 2018. During its term, the fee waiver agreement cannot be terminated or amended to increase expense limits or reduce the advisory fee waiver without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
Further, the Adviser has contractually agreed, through at least June 30, 2019, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the year ended December 31, 2017, the Adviser waived advisory fees of $2,447.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco a fee for costs incurred in providing accounting services and fund administrative services to the Fund and to reimburse Invesco for fees paid to insurance companies that have agreed to provide certain administrative services to the Fund. These administrative services provided by the insurance companies may include, among other things: maintenance of master accounts with the Fund; tracking, recording and transmitting net purchase and redemption orders for Fund shares; maintaining and preserving records related to the purchase, redemption and other account activity of variable product owners; distributing copies of Fund documents such as prospectuses, proxy materials and periodic reports, to variable product owners, and responding to inquiries from variable product owners about the Fund. Pursuant to such agreement, for the year ended December 31, 2017, Invesco was paid $50,000 for accounting and fund administrative services and was reimbursed $73,515 for fees paid to insurance companies.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (IIS) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. For the year ended December 31, 2017, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
The Trust has entered into a master distribution agreement with Invesco Distributors, Inc. (IDI) to serve as the distributor for the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Funds Series II shares (the Plan). The Fund, pursuant to the Plan, pays IDI compensation at the annual rate of 0.25% of the Funds average daily net assets of Series II shares. The fees are accrued daily and paid monthly. Of the Plan payments, up to 0.25% of the average daily net assets of the Series II shares may be paid to insurance companies who furnish continuing personal shareholder services to customers who purchase and own Series II shares of the Fund. For the year ended December 31, 2017, expenses incurred under the Plan are detailed in the Statement of Operations as Distribution fees.
For the year ended December 31, 2017, the Fund incurred $268 in brokerage commissions with Invesco Capital Markets, Inc., an affiliate of the Adviser and IDI, for portfolio transactions executed on behalf of the Fund.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
Invesco V.I. Managed Volatility Fund
NOTE 3Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investments assigned level:
Level 1 | Prices are determined using quoted prices in an active market for identical assets. |
Level 2 | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Level 3 | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Funds own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of December 31, 2017. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
The Funds policy is to recognize transfers in and out of the valuation levels as of the end of the reporting period. During the year ended December 31, 2017, there were no material transfers between valuation levels.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Investments in Securities | ||||||||||||||||
Common Stocks & Other Equity Interests |
$ | 27,631,299 | $ | 901,274 | $ | | $ | 28,532,573 | ||||||||
Bonds and Notes |
| 10,581,406 | | 10,581,406 | ||||||||||||
U.S. Treasury Securities |
| 3,351,925 | | 3,351,925 | ||||||||||||
Preferred Stocks |
| 107,844 | | 107,844 | ||||||||||||
Money Market Funds |
2,770,461 | | | 2,770,461 | ||||||||||||
Total Investments in Securities |
30,401,760 | 14,942,449 | | 45,344,209 | ||||||||||||
Other Investments Assets* | ||||||||||||||||
Forward Foreign Currency Contracts |
| 486 | | 486 | ||||||||||||
Other Investments Liabilities* | ||||||||||||||||
Forward Foreign Currency Contracts |
| (39,718 | ) | | (39,718 | ) | ||||||||||
Total Other Investments |
| (39,232 | ) | | (39,232 | ) | ||||||||||
Total Investments |
$ | 30,401,760 | $ | 14,903,217 | $ | | $ | 45,304,977 |
* | Unrealized appreciation (depreciation). |
NOTE 4Derivative Investments
The Fund may enter into an International Swaps and Derivatives Association Master Agreement (ISDA Master Agreement) under which a fund may trade OTC derivatives. An OTC transaction entered into under an ISDA Master Agreement typically involves a collateral posting arrangement, payment netting provisions and close-out netting provisions. These netting provisions allow for reduction of credit risk through netting of contractual obligations. The enforceability of the netting provisions of the ISDA Master Agreement depends on the governing law of the ISDA Master Agreement, among other factors.
For financial reporting purposes, the Fund does not offset OTC derivative assets or liabilities that are subject to ISDA Master Agreements in the Statement of Assets and Liabilities.
Value of Derivative Investments at Period-End
The table below summarizes the value of the Funds derivative investments, detailed by primary risk exposure, held as of December 31, 2017:
Value | ||||
Derivative Assets | Currency Risk |
|||
Unrealized appreciation on forward foreign currency contracts outstanding |
$ | 486 | ||
Derivatives not subject to master netting agreements |
| |||
Total Derivative Assets subject to master netting agreements |
$ | 486 |
Value | ||||
Derivative Liabilities | Currency Risk |
|||
Unrealized depreciation on forward foreign currency contracts outstanding |
$ | (39,718 | ) | |
Derivatives not subject to master netting agreements |
| |||
Total Derivative Liabilities subject to master netting agreements |
$ | (39,718 | ) |
Invesco V.I. Managed Volatility Fund
Offsetting Assets and Liabilities
The table below reflects the Funds exposure to Counterparties subject to either an ISDA Master Agreement or other agreement for OTC derivative transactions as of December 31, 2017.
Financial Derivative Assets |
Financial Derivative Liabilities |
Net Value of Derivatives |
Collateral (Received)/ Pledged |
Net Amount |
||||||||||||||||||||
Counterparty | Forward Foreign Currency Contracts |
Forward Foreign Currency Contracts |
Non-Cash | Cash | ||||||||||||||||||||
Bank of New York Mellon (The) |
$ | | $ | (19,978 | ) | $ | (19,978 | ) | $ | | $ | | $ | (19,978 | ) | |||||||||
State Street Bank and Trust Co. |
486 | (19,740 | ) | (19,254 | ) | | | (19,254 | ) | |||||||||||||||
Total |
$ | 486 | $ | (39,718 | ) | $ | (39,232 | ) | $ | | $ | | $ | (39,232 | ) |
Effect of Derivative Investments for the year ended December 31, 2017
The table below summarizes the gains (losses) on derivative investments, detailed by primary risk exposure, recognized in earnings during the period:
Location of Gain (Loss) on Statement of Operations |
||||||||||||
Currency Risk |
Equity Risk |
Total | ||||||||||
Realized Gain (Loss): |
||||||||||||
Forward foreign currency contracts |
$ | (94,515 | ) | $ | | $ | (94,515 | ) | ||||
Futures contracts |
| (25,150 | ) | (25,150 | ) | |||||||
Change in Net Unrealized Appreciation (Depreciation): |
||||||||||||
Forward foreign currency contracts |
(92,727 | ) | | (92,727 | ) | |||||||
Total |
$ | (187,242 | ) | $ | (25,150 | ) | $ | (212,392 | ) |
The table below summarizes the twelve months average notional value of forward foreign currency contracts and the two days average notional value of futures contracts outstanding during the period.
Forward Foreign Currency |
Futures Contracts |
|||||||
Average notional value |
$ | 2,832,114 | $ | 3,824,288 |
NOTE 5Security Transactions with Affiliated Funds
The Fund is permitted to purchase or sell securities from or to certain other Invesco Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment adviser (or affiliated investment advisers), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, for the year ended December 31, 2017, the Fund engaged in securities purchases of $99,345.
NOTE 6Trustees and Officers Fees and Benefits
Trustees and Officers Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees and Officers Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees were eligible to participate in a retirement plan that provided for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees and Officers Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 7Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period-end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
Invesco V.I. Managed Volatility Fund
NOTE 8Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended December 31, 2017 and 2016:
2017 | 2016 | |||||||
Ordinary income |
$ | 626,837 | $ | 1,039,201 | ||||
Long-term capital gain |
| 1,392,685 | ||||||
Total distributions |
$ | 626,837 | $ | 2,431,886 |
Tax Components of Net Assets at Period-End:
2017 | ||||
Undistributed ordinary income |
$ | 670,231 | ||
Undistributed long-term gain |
1,351,361 | |||
Net unrealized appreciation investments |
6,670,010 | |||
Net unrealized appreciation foreign currencies |
580 | |||
Temporary book/tax differences |
(62,489 | ) | ||
Shares of beneficial interest |
36,920,465 | |||
Total net assets |
$ | 45,550,158 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Funds net unrealized appreciation difference is attributable primarily to wash sales, tax treatment of futures contracts and adjustments to contingent payment debt instruments.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Funds temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund does not have a capital loss carryforward as of December 31, 2017.
NOTE 9Investment Transactions
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended December 31, 2017 was $7,995,651 and $18,737,343, respectively. During the same period, purchases and sales of U.S. Treasury obligations were $34,669,589 and $34,602,721, respectively. Cost of investments, including any derivatives, on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investments on a Tax Basis | ||||
Aggregate unrealized appreciation of investments |
$ | 7,612,472 | ||
Aggregate unrealized (depreciation) of investments |
(942,462 | ) | ||
Net unrealized appreciation of investments |
$ | 6,670,010 |
Cost of investments for tax purposes is $38,634,967.
NOTE 10Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of contingent payment debt instruments sold, on December 31, 2017, undistributed net investment income was increased by $83,949 and undistributed net realized gain was decreased by $83,949. This reclassification had no effect on the net assets of the Fund.
Invesco V.I. Managed Volatility Fund
NOTE 11Share Information
Summary of Share Activity | ||||||||||||||||
Years ended December 31, | ||||||||||||||||
2017(a) | 2016 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: |
||||||||||||||||
Series I |
283,126 | $ | 3,509,281 | 300,423 | $ | 3,419,830 | ||||||||||
Series II |
13,842 | 167,061 | 8,242 | 92,158 | ||||||||||||
Issued as reinvestment of dividends: |
||||||||||||||||
Series I |
48,606 | 610,486 | 209,985 | 2,366,531 | ||||||||||||
Series II |
1,316 | 16,351 | 5,856 | 65,355 | ||||||||||||
Reacquired: |
||||||||||||||||
Series I |
(1,147,686 | ) | (14,337,959 | ) | (918,562 | ) | (10,365,620 | ) | ||||||||
Series II |
(26,720 | ) | (328,839 | ) | (23,850 | ) | (267,680 | ) | ||||||||
Net increase (decrease) in share activity |
(827,516 | ) | $ | (10,363,619 | ) | (417,906 | ) | $ | (4,689,426 | ) |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 60% of the outstanding shares of the Fund. The Fund and the Funds principal underwriter or adviser, are parties to participation agreements with these entities whereby these entities sell units of interest in separate accounts funding variable products that are invested in the Fund. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
NOTE 12Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Net asset value, beginning of period |
Net investment income(a) |
Net gains (losses) on securities (both realized and unrealized) |
Total from investment operations |
Dividends from net investment income |
Distributions from net realized gains |
Total distributions |
Net asset value, end of period |
Total return(b) |
Net assets, end of period (000s omitted) |
Ratio
of expenses to average net assets with fee waivers and/or expenses absorbed |
Ratio of expenses to average net assets without fee waivers and/or expenses absorbed |
Ratio of net investment income to average net assets |
Portfolio turnover(c) |
|||||||||||||||||||||||||||||||||||||||||||
Series I |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/17 |
$ | 11.97 | $ | 0.18 | (d) | $ | 1.08 | $ | 1.26 | $ | (0.17 | ) | $ | | $ | (0.17 | ) | $ | 13.06 | 10.56 | % | $ | 44,104 | 1.13 | %(e) | 1.13 | %(e) | 1.42 | %(d)(e) | 91 | % | |||||||||||||||||||||||||
Year ended 12/31/16 |
11.38 | 0.14 | 1.03 | 1.17 | (0.22 | ) | (0.36 | ) | (0.58 | ) | 11.97 | 10.61 | 50,183 | 1.15 | 1.16 | 1.26 | 92 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 |
19.02 | 0.18 | (0.74 | ) | (0.56 | ) | (0.27 | ) | (6.81 | ) | (7.08 | ) | 11.38 | (2.15 | ) | 52,360 | 1.08 | 1.10 | 1.07 | 117 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 |
17.03 | 0.24 | 3.23 | 3.47 | (0.56 | ) | (0.92 | ) | (1.48 | ) | 19.02 | 20.57 | 70,717 | 1.03 | 1.10 | 1.26 | 201 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 |
16.20 | 0.47 | 1.25 | 1.72 | (0.52 | ) | (0.37 | ) | (0.89 | ) | 17.03 | 10.76 | 61,806 | 1.07 | 1.08 | 2.73 | 15 | |||||||||||||||||||||||||||||||||||||||
Series II |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/17 |
11.84 | 0.15 | (d) | 1.07 | 1.22 | (0.14 | ) | | (0.14 | ) | 12.92 | 10.33 | 1,446 | 1.38 | (e) | 1.38 | (e) | 1.17 | (d)(e) | 91 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/16 |
11.26 | 0.11 | 1.02 | 1.13 | (0.19 | ) | (0.36 | ) | (0.55 | ) | 11.84 | 10.31 | 1,462 | 1.40 | 1.41 | 1.01 | 92 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 |
18.88 | 0.13 | (0.72 | ) | (0.59 | ) | (0.22 | ) | (6.81 | ) | (7.03 | ) | 11.26 | (2.37 | ) | 1,500 | 1.33 | 1.35 | 0.82 | 117 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 |
16.91 | 0.19 | 3.21 | 3.40 | (0.51 | ) | (0.92 | ) | (1.43 | ) | 18.88 | 20.30 | 1,794 | 1.28 | 1.35 | 1.01 | 201 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 |
16.09 | 0.43 | 1.23 | 1.66 | (0.47 | ) | (0.37 | ) | (0.84 | ) | 16.91 | 10.45 | 1,664 | 1.32 | 1.33 | 2.48 | 15 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year, if applicable, and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns. |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. |
(d) | Net investment income per share and the ratio of net investment income to average net assets includes significant dividends received during the year ended December 31, 2017. Net investment income per share and the ratio of net investment income to average net assets excluding the significant dividends are $0.14 and 1.11%, $0.11 and 0.86% for Series I and Series II shares, respectively. |
(e) | Ratios are based on average daily net assets (000s omitted) of $47,946 and $1,474 for Series I and Series II shares, respectively. |
Invesco V.I. Managed Volatility Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
and Shareholders of Invesco V.I. Managed Volatility Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Invesco V.I. Managed Volatility Fund (one of the funds constituting AIM Variable Insurance Funds (Invesco Variable Insurance Funds), hereafter referred to as the Fund) as of December 31, 2017, the related statement of operations for the year ended December 31, 2017, the statement of changes in net assets for each of the two years in the period ended December 31, 2017, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2017 (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2017 and the financial highlights for each of the five years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Funds management. Our responsibility is to express an opinion on the Funds financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2017 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, TX
February 14, 2018
We have served as the auditor of one or more of the investment companies in the Invesco/PowerShares group of investment companies since at least 1995. We have not determined the specific year we began serving as auditor.
Invesco V.I. Managed Volatility Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period July 1, 2017 through December 31, 2017.
The actual and hypothetical expenses in the examples below do not represent the effect of any fees or other expenses assessed in connection with a variable product; if they did, the expenses shown would be higher while the ending account values shown would be lower.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled Actual Expenses Paid During Period to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Funds actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs. Therefore, the hypothetical information is useful in comparing ongoing costs, and will not help you determine the relative total costs of owning different funds.
Class | Beginning Account Value (07/01/17) |
ACTUAL | HYPOTHETICAL (5% annual return before |
|||||||||||||||||||||
Ending Account Value (12/31/17)1 |
Expenses Paid During Period2 |
Ending Account Value (12/31/17) |
Expenses Paid During Period2 |
Annualized Ratio |
||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 1,063.00 | $ | 5.88 | $ | 1,019.51 | $ | 5.75 | 1.13 | % | ||||||||||||
Series II | 1,000.00 | 1,062.00 | 7.17 | 1,018.25 | 7.02 | 1.38 |
1 | The actual ending account value is based on the actual total return of the Fund for the period July 1, 2017 through December 31, 2017, after actual expenses and will differ from the hypothetical ending account value which is based on the Funds expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Funds annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half year. |
Invesco V.I. Managed Volatility Fund
Tax Information
Form 1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific states requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended December 31, 2017:
Federal and State Income Tax |
||||
Corporate Dividends Received Deduction* |
93.71 | % | ||
U.S. Treasury Obligations* |
3.72 | % |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Funds fiscal year. |
Invesco V.I. Managed Volatility Fund
Trustees and Officers
The address of each trustee and officer is AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Trust), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trusts organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 1960 Trustee |
2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business
Formerly: Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US), Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) |
158 | None | ||||
Philip A. Taylor2 1954 Trustee and Senior Vice President |
2006 | Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco Aim Management Group, Inc.) (financial services holding company); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.) (registered transfer agent); Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company); Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management).
Formerly: Co-Chairman, Co-President and Co-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chief Executive Officer and President, Van Kampen Exchange Corp; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurers Series Trust (Invesco Treasurers Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurers Series Trust (Invesco Treasurers Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) (registered broker dealer); Manager, Invesco PowerShares Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco Aim Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurers Series Trust (Invesco Treasurers Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. |
158 | None |
1 | Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser. |
2 | Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser. |
Invesco V.I. Managed Volatility Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Independent Trustees | ||||||||
Bruce L. Crockett 1944 Trustee and Chair |
1993 | Chairman, Crockett Technologies Associates (technology consulting company)
Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute: Member of the Audit Committee, Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council |
158 | Director and Chairman of the Audit Committee, ALPS (Attorneys Liability Protection Society) (insurance company); Director and Member of the Audit Committee and Compensation Committee, Ferroglobe PLC (metallurgical company) | ||||
David C. Arch 1945 Trustee |
2010 | Chairman of Blistex Inc. (consumer health care products manufacturer); Member, World Presidents Organization | 158 | Board member of the Illinois Manufacturers Association | ||||
Jack M. Fields 1952 Trustee |
1997 | Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Chairman, Discovery Learning Alliance (non-profit)
Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff) (human resources provider); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives |
158 | None | ||||
Cynthia Hostetler 1962 Trustee |
2017 | Non-Executive Director and Trustee of a number of public and private business corporations
Formerly: Head of Investment Funds and Private Equity, Overseas Private Investment Corporation; President, First Manhattan Bancorporation, Inc.; Attorney, Simpson Thacher & Bartlett LLP |
158 | Vulcan Materials Company (construction materials company); Trilinc Global Impact Fund; Aberdeen Investment Funds (4 portfolios); Artio Global Investment LLC (mutual fund complex); Edgen Group, Inc. (specialized energy and infrastructure products distributor) | ||||
Eli Jones 1961 Trustee |
2016 | Professor and Dean, Mays Business School Texas A&M University
Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University; Director, Arvest Bank |
158 | Insperity, Inc. (formerly known as Administaff) (human resources provider) | ||||
Prema Mathai-Davis 1950 Trustee |
1998 | Retired. | 158 | None | ||||
Teresa M. Ressel 1962 Trustee |
2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Chief Financial Officer, Olayan America, The Olayan Group (international investor/commercial/industrial); Chief Executive Officer, UBS Securities LLC; Group Chief Operating Officer, Americas, UBS AG; Assistant Secretary for Management & Budget and CFO, US Department of the Treasury |
158 | Atlantic Power Corporation (power generation company); ON Semiconductor Corp. (semiconductor supplier) | ||||
Ann Barnett Stern 1957 Trustee |
2017 | President and Chief Executive Officer, Houston Endowment Inc. (private philanthropic institution)
Formerly: Executive Vice President and General Counsel, Texas Childrens Hospital; Attorney, Beck, Redden and Secrest, LLP; Business Law Instructor, University of St. Thomas; Attorney, Andrews & Kurth LLP |
158 | Federal Reserve Bank of Dallas | ||||
Raymond Stickel, Jr. 1944 Trustee |
2005 | Retired.
Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios); Partner, Deloitte & Touche |
158 | None | ||||
Robert C. Troccoli 1949 Trustee |
2016 | Adjunct Professor, University of Denver Daniels College of Business
Formerly: Senior Partner, KPMG LLP |
158 | None | ||||
Christopher L. Wilson 1957 Trustee |
2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Managing Partner, CT2, LLC (investing and consulting firm); President/Chief Executive Officer, Columbia Funds, Bank of America Corporation; President/Chief Executive Officer, CDC IXIS Asset Management Services, Inc.; Principal & Director of Operations, Scudder Funds, Scudder, Stevens & Clark, Inc.; Assistant Vice President, Fidelity Investments |
158 | TD Asset Management USA Inc. (mutual fund complex) (22 portfolios); ISO New England, Inc. (non-profit organization managing regional electricity market) |
Invesco V.I. Managed Volatility Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers | ||||||||
Sheri Morris 1964 President, Principal Executive Officer and Treasurer |
1999 | President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco Aim Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; and Treasurer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust and PowerShares Actively Managed Exchange-Traded Fund Trust |
N/A | N/A | ||||
Russell C. Burk 1958 Senior Vice President and Senior Officer |
2005 | Senior Vice President and Senior Officer, The Invesco Funds | N/A | N/A | ||||
John M. Zerr 1962 Senior Vice President, Chief Legal Officer and Secretary |
2006 | Director, Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Managing Director, Invesco PowerShares Capital Management LLC; Director, Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust; Manager and Secretary, Invesco Indexing LLC
Formerly: Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser); Vice President and Secretary, PBHG Funds (an investment company) and PBHG Insurance Series Fund (an investment company); Chief Operating Officer, General Counsel and Secretary, Old Mutual Investment Partners (a broker-dealer); General Counsel and Secretary, Old Mutual Fund Services (an administrator) and Old Mutual Shareholder Services (a shareholder servicing center); Executive Vice President, General Counsel and Secretary, Old Mutual Capital, Inc. (an investment adviser); and Vice President and Secretary, Old Mutual Advisors Funds (an investment company) |
N/A | N/A | ||||
Gregory G. McGreevey 1962 Senior Vice President |
2012 | Senior Managing Director, Invesco Ltd.; Director, Chairman, President, and Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President, Invesco Management Group, Inc.; Director, Invesco Mortgage Capital, Inc. and Invesco Senior Secured Management, Inc.; and Senior Vice President, The Invesco Funds
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A | ||||
Kelli Gallegos 1970 Vice President, Principal Financial Officer and Assistant Treasurer |
2008 | Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A |
Invesco V.I. Managed Volatility Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers(continued) | ||||||||
Tracy Sullivan 1962 Vice President, Chief Tax Officer and Assistant Treasurer |
2008 | Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A | ||||
Crissie M. Wisdom 1969 Anti-Money Laundering Compliance Officer |
2013 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., Invesco Management Group, Inc., The Invesco Funds, and PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp. |
N/A | N/A | ||||
Robert R. Leveille 1969 Chief Compliance Officer |
2016 | Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds
Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds |
N/A | N/A |
The Statement of Additional Information of the Trust includes additional information about the Funds Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Funds Statement of Additional Information for information on the Funds sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 |
Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Auditors PricewaterhouseCoopers LLP 1000 Louisiana Street, Suite 5800 Houston, TX 77002-5678 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2005 Market Street, Suite 2600 Philadelphia, PA 19103-7018 |
Counsel to the Independent Trustees Goodwin Procter LLP 901 New York Avenue, N.W. Washington, D.C. 20001 |
Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
Invesco V.I. Managed Volatility Fund
| ||||
Annual Report to Shareholders
|
December 31, 2017 | |||
| ||||
Invesco V.I. Mid Cap Core Equity Fund
|
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Funds semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The Funds Form N-Q filings are available on the SEC website, sec.gov. Copies of the Funds Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-07452 and 033-57340. The Funds most recent portfolio holdings, as filed on Form N-Q, have also been made available to insurance companies issuing variable annuity contracts and variable life insurance policies (variable products) that invest in the Fund. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
This report must be accompanied or preceded by a currently effective Fund prospectus and variable product prospectus, which contain more complete information, including sales charges and expenses. Investors should read each carefully before investing.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
Invesco Distributors, Inc. |
VIMCCE-AR-1 02082018 1418 |
Managements Discussion of Fund Performance
Invesco V.I. Mid Cap Core Equity Fund
Invesco V.I. Mid Cap Core Equity Fund
Your Funds Long-Term Performance
Results of a $10,000 Investment Oldest Share Class(es)
Fund and index data from 12/31/07
1 | Source: FactSet Research Systems Inc. |
2 | Source: Lipper Inc. |
Past performance cannot guarantee
comparable future results.
Invesco V.I. Mid Cap Core Equity Fund
Invesco V.I. Mid Cap Core Equity Funds investment objective is long-term growth of capital.
∎ | Unless otherwise stated, information presented in this report is as of December 31, 2017, and is based on total net assets. |
∎ | Unless otherwise noted, all data provided by Invesco. |
Invesco V.I. Mid Cap Core Equity Fund
Schedule of Investments(a)
December 31, 2017
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Mid Cap Core Equity Fund
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poors. |
(b) | Non-income producing security. |
(c) | The money market fund and the Fund are affiliated by having the same investment adviser. The rate shown is the 7-day SEC standardized yield as of December 31, 2017. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Mid Cap Core Equity Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Mid Cap Core Equity Fund
Statement of Changes in Net Assets
For the years ended December 31, 2017 and 2016
2017 | 2016 | |||||||
Operations: |
||||||||
Net investment income |
$ | 891,482 | $ | 1,492,494 | ||||
Net realized gain |
34,934,135 | 6,883,128 | ||||||
Change in net unrealized appreciation |
9,878,571 | 31,767,897 | ||||||
Net increase in net assets resulting from operations |
45,704,188 | 40,143,519 | ||||||
Distributions to shareholders from net investment income: |
||||||||
Series I |
(1,002,873 | ) | (150,245 | ) | ||||
Series ll |
(437,528 | ) | | |||||
Total distributions from net investment income |
(1,440,401 | ) | (150,245 | ) | ||||
Distributions to shareholders from net realized gains: |
||||||||
Series l |
(3,883,265 | ) | (12,808,400 | ) | ||||
Series ll |
(2,880,476 | ) | (8,160,367 | ) | ||||
Total distributions from net realized gains |
(6,763,741 | ) | (20,968,767 | ) | ||||
Share transactionsnet: |
||||||||
Series l |
(25,346,439 | ) | (17,870,780 | ) | ||||
Series ll |
(4,339,452 | ) | 4,467,820 | |||||
Net increase (decrease) in net assets resulting from share transactions |
(29,685,891 | ) | (13,402,960 | ) | ||||
Net increase in net assets |
7,814,155 | 5,621,547 | ||||||
Net assets: |
||||||||
Beginning of year |
325,582,220 | 319,960,673 | ||||||
End of year (includes undistributed net investment income of $860,887 and $1,313,167, respectively) |
$ | 333,396,375 | $ | 325,582,220 |
Notes to Financial Statements
December 31, 2017
NOTE 1Significant Accounting Policies
Invesco V.I. Mid Cap Core Equity Fund (the Fund) is a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Trust). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end series management investment company consisting of twenty-four separate portfolios, (each constituting a Fund). The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each Fund or class will be voted on exclusively by the shareholders of such Fund or class. Current Securities and Exchange Commission (SEC) guidance, however, requires participating insurance companies offering separate accounts to vote shares proportionally in accordance with the instructions of the contract owners whose investments are funded by shares of each Fund or class.
The Funds investment objective is long-term growth of capital.
The Fund currently offers two classes of shares, Series I and Series II, both of which are offered to insurance company separate accounts funding variable annuity contracts and variable life insurance policies (variable products).
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946, Financial Services Investment Companies.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations Securities, including restricted securities, are valued according to the following policy. |
A security listed or traded on an exchange (except convertible securities) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and asked prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and asked prices. For purposes of determining net asset value (NAV) per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (NYSE).
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end-of-day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
Invesco V.I. Mid Cap Core Equity Fund
Debt obligations (including convertible securities) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual trading characteristics and other market data. Pricing services generally value debt obligations assuming orderly transactions of institutional round lot size, but a fund may hold or transact in the same securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Foreign securities (including foreign exchange contracts) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that the investment adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trusts officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/asked quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a securitys fair value.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuers assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
B. | Securities Transactions and Investment Income Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any) is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Funds net asset value and, accordingly, they reduce the Funds total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and the Statement of Changes in Net Assets, or the net investment income per share and the ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. | Country Determination For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuers securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
D. | Distributions Distributions from net investment income and net realized capital gain, if any, are generally declared and paid to separate accounts of participating insurance companies annually and recorded on the ex-dividend date. |
E. | Federal Income Taxes The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the Internal Revenue Code), necessary to qualify as a regulated investment company and to distribute substantially all of the Funds taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. |
Invesco V.I. Mid Cap Core Equity Fund
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Funds uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
F. | Expenses Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
G. | Accounting Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
H. | Indemnifications Under the Trusts organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Funds servicing agreements, that contain a variety of indemnification clauses. The Funds maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
I. | Foreign Currency Translations Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Funds books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. |
The Fund may invest in foreign securities, which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests and are shown in the Statement of Operations.
J. | Forward Foreign Currency Contracts The Fund may engage in foreign currency transactions either on a spot (i.e. for prompt delivery and settlement) basis, or through forward foreign currency contracts, to manage or minimize currency or exchange rate risk. |
The Fund may also enter into forward foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to lock in the U.S. dollar price of that security, or the Fund may also enter into forward foreign currency contracts that do not provide for physical settlement of the two currencies, but instead are settled by a single cash payment calculated as the difference between the agreed upon exchange rate and the spot rate at settlement based upon an agreed upon notional amount (non-deliverable forwards). The Fund will set aside liquid assets in an amount equal to the daily mark-to-market obligation for forward foreign currency contracts.
A forward foreign currency contract is an obligation between two parties (Counterparties) to purchase or sell a specific currency for an agreed-upon price at a future date. The use of forward foreign currency contracts does not eliminate fluctuations in the price of the underlying securities the Fund owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statement of Operations. The primary risks associated with forward foreign currency contracts include failure of the Counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities.
NOTE 2Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the Adviser or Invesco). Under the terms of the investment advisory agreement, the Fund accrues daily and pays monthly an advisory fee to the Adviser based on the annual rate of the Funds average daily net assets as follows:
Average Daily Net Assets | Rate | |||||||
First $500 million |
0 | .725% | ||||||
Next $500 million |
0 | .70% | ||||||
Next $500 million |
0 | .675% | ||||||
Over $1.5 billion |
0 | .65% |
For the year ended December 31, 2017, the effective advisory fees incurred by the Fund was 0.725%.
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and
Invesco V.I. Mid Cap Core Equity Fund
Invesco Canada Ltd. and separate sub-advisory agreements with Invesco PowerShares Capital Management LLC and Invesco Asset Management (India) Private Limited (collectively, the Affiliated Sub-Advisers) the Adviser, not the Fund, will pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2018, to waive advisory fees and/or reimburse expenses to the extent necessary to limit total annual operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Series I shares to 2.00% and Series II shares to 2.25% of average daily net assets (the expense limits). In determining the Advisers obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on June 30, 2018. During its term, the fee waiver agreement cannot be terminated or amended to increase expense limits or reduce the advisory fee waiver without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
Further, the Adviser has contractually agreed, through at least June 30, 2019, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the year ended December 31, 2017, the Adviser waived advisory fees of $71,534.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco a fee for costs incurred in providing accounting services and fund administrative services to the Fund and to reimburse Invesco for fees paid to insurance companies that have agreed to provide certain administrative services to the Fund. These administrative services provided by the insurance companies may include, among other things: maintenance of master accounts with the Fund; tracking, recording and transmitting net purchase and redemption orders for Fund shares; maintaining and preserving records related to the purchase, redemption and other account activity of variable product owners; distributing copies of Fund documents such as prospectuses, proxy materials and periodic reports, to variable product owners, and responding to inquiries from variable product owners about the Fund. Pursuant to such agreement, for the year ended December 31, 2017, Invesco was paid $81,167 for accounting and fund administrative services and was reimbursed $496,120 for fees paid to insurance companies.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (IIS) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. For the year ended December 31, 2017, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
The Trust has entered into a master distribution agreement with Invesco Distributors, Inc. (IDI) to serve as the distributor for the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Funds Series II shares (the Plan). The Fund, pursuant to the Plan, pays IDI compensation at the annual rate of 0.25% of the Funds average daily net assets of Series II shares. The fees are accrued daily and paid monthly. Of the Plan payments, up to 0.25% of the average daily net assets of the Series II shares may be paid to insurance companies who furnish continuing personal shareholder services to customers who purchase and own Series II shares of the Fund. For the year ended December 31, 2017, expenses incurred under the Plan are detailed in the Statement of Operations as Distribution fees .
For the year ended December 31, 2017, the Fund incurred $147 in brokerage commissions with Invesco Capital Markets, Inc., an affiliate of the Adviser and IDI, for portfolio transactions executed on behalf of the Fund.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
NOTE 3Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investments assigned level:
Level 1 | Prices are determined using quoted prices in an active market for identical assets. |
Level 2 | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Level 3 | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Funds own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of December 31, 2017. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
Invesco V.I. Mid Cap Core Equity Fund
The Funds policy is to recognize transfers in and out of the valuation levels as of the end of the reporting period. During the year ended December 31, 2017, there were no material transfers between valuation levels.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Investments in Securities | ||||||||||||||||
Common Stocks |
$ | 240,020,392 | $ | 11,462,356 | $ | | $ | 251,482,748 | ||||||||
Money Market Funds |
80,553,440 | | | 80,553,440 | ||||||||||||
Total Investments |
$ | 320,573,832 | $ | 11,462,356 | $ | | $ | 332,036,188 |
NOTE 4Security Transactions with Affiliated Funds
The Fund is permitted to purchase or sell securities from or to certain other Invesco Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment adviser (or affiliated investment advisers), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, for the year ended December 31, 2017, the Fund engaged in securities sales of $2,933,554, which resulted in net realized gains of $95,107.
NOTE 5Trustees and Officers Fees and Benefits
Trustees and Officers Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees and Officers Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees were eligible to participate in a retirement plan that provided for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees and Officers Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 6Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period-end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 7Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended December 31, 2017 and 2016:
2017 | 2016 | |||||||
Ordinary income |
$ | 2,926,214 | $ | 4,117,708 | ||||
Long-term capital gain |
5,277,928 | 17,001,304 | ||||||
Total distributions |
$ | 8,204,142 | $ | 21,119,012 |
Tax Components of Net Assets at Period-End:
2017 | ||||
Undistributed ordinary income |
$ | 977,777 | ||
Undistributed long-term gain |
34,814,533 | |||
Net unrealized appreciation investments |
85,688,476 | |||
Net unrealized appreciation foreign currencies |
70 | |||
Temporary book/tax differences |
(116,890 | ) | ||
Shares of beneficial interest |
212,032,409 | |||
Total net assets |
$ | 333,396,375 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Funds net unrealized appreciation difference is attributable primarily to wash sales.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Funds temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date
Invesco V.I. Mid Cap Core Equity Fund
will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund does not have a capital loss carryforward as of December 31, 2017.
NOTE 8Investment Transactions
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended December 31, 2017 was $120,816,218 and $186,543,086, respectively. Cost of investments, including any derivatives, on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investments on a Tax Basis | ||||
Aggregate unrealized appreciation of investments |
$ | 90,655,718 | ||
Aggregate unrealized (depreciation) of investments |
(4,967,242 | ) | ||
Net unrealized appreciation of investments |
$ | 85,688,476 |
Cost of investments for tax purposes is $246,347,712.
NOTE 9Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of real estate investment trust distributions, return of capital adjustments and foreign currency transactions, on December 31, 2017, undistributed net investment income was increased by $96,639, undistributed net realized gain was decreased by $47,685 and shares of beneficial interest was decreased by $48,954. This reclassification had no effect on the net assets of the Fund.
NOTE 10Share Information
Summary of Share Activity | ||||||||||||||||
Years ended December 31, | ||||||||||||||||
2017(a) | 2016 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: |
||||||||||||||||
Series I |
246,444 | $ | 3,379,997 | 690,232 | $ | 8,736,328 | ||||||||||
Series II |
1,068,806 | 14,280,075 | 1,380,934 | 16,624,301 | ||||||||||||
Issued as reinvestment of dividends: |
||||||||||||||||
Series I |
355,873 | 4,886,138 | 1,025,209 | 12,958,645 | ||||||||||||
Series II |
246,692 | 3,318,004 | 658,626 | 8,160,367 | ||||||||||||
Reacquired: |
||||||||||||||||
Series I |
(2,449,096 | ) | (33,612,574 | ) | (3,166,296 | ) | (39,565,753 | ) | ||||||||
Series II |
(1,632,724 | ) | (21,937,531 | ) | (1,649,202 | ) | (20,316,848 | ) | ||||||||
Net increase (decrease) in share activity |
(2,164,005 | ) | $ | (29,685,891 | ) | (1,060,497 | ) | $ | (13,402,960 | ) |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 56% of the outstanding shares of the Fund. The Fund and the Funds principal underwriter or adviser, are parties to participation agreements with these entities whereby these entities sell units of interest in separate accounts funding variable products that are invested in the Fund. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
Invesco V.I. Mid Cap Core Equity Fund
NOTE 11Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Net asset value, beginning of period |
Net investment income |
Net gains (losses) on securities (both realized and unrealized) |
Total from investment |
Dividends from net investment |
Distributions from net |
Total distributions |
Net asset of period |
Total return(b) |
Net assets, end of period (000s omitted) |
Ratio of expenses to average net assets with fee waivers and/or expenses absorbed |
Ratio of expenses assets without fee
waivers absorbed |
Ratio of net investment to average |
Portfolio turnover(c) |
|||||||||||||||||||||||||||||||||||||||||||
Series I |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/17 |
$ | 12.87 | $ | 0.05 | $ | 1.85 | $ | 1.90 | $ | (0.07 | ) | $ | (0.29 | ) | $ | (0.36 | ) | $ | 14.41 | 14.92 | % | $ | 192,277 | 0.94 | %(d) | 0.96 | %(d) | 0.37 | %(d) | 45 | % | |||||||||||||||||||||||||
Year ended 12/31/16 |
12.12 | 0.07 | 1.54 | 1.61 | (0.01 | ) | (0.85 | ) | (0.86 | ) | 12.87 | 13.43 | 195,464 | 0.98 | 1.00 | 0.57 | 29 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 |
14.06 | 0.02 | (0.58 | ) | (0.56 | ) | (0.05 | ) | (1.33 | ) | (1.38 | ) | 12.12 | (4.03 | ) | 201,685 | 1.01 | 1.03 | 0.17 | 44 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 |
15.13 | 0.05 | 0.64 | 0.69 | (0.01 | ) | (1.75 | ) | (1.76 | ) | 14.06 | 4.43 | 254,553 | 1.01 | 1.04 | 0.29 | 38 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 |
12.71 | 0.01 | 3.59 | 3.60 | (0.11 | ) | (1.07 | ) | (1.18 | ) | 15.13 | 28.81 | 290,550 | 1.01 | 1.04 | 0.09 | 34 | |||||||||||||||||||||||||||||||||||||||
Series II |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/17 |
12.61 | 0.02 | 1.81 | 1.83 | (0.04 | ) | (0.29 | ) | (0.33 | ) | 14.11 | 14.65 | 141,120 | 1.19 | (d) | 1.21 | (d) | 0.12 | (d) | 45 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/16 |
11.91 | 0.04 | 1.51 | 1.55 | | (0.85 | ) | (0.85 | ) | 12.61 | 13.16 | 130,118 | 1.23 | 1.25 | 0.32 | 29 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 |
13.84 | (0.01 | ) | (0.57 | ) | (0.58 | ) | (0.02 | ) | (1.33 | ) | (1.35 | ) | 11.91 | (4.28 | ) | 118,276 | 1.26 | 1.28 | (0.08 | ) | 44 | ||||||||||||||||||||||||||||||||||
Year ended 12/31/14 |
14.95 | 0.01 | 0.63 | 0.64 | | (1.75 | ) | (1.75 | ) | 13.84 | 4.17 | 128,305 | 1.26 | 1.29 | 0.04 | 38 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 |
12.58 | (0.02 | ) | 3.54 | 3.52 | (0.08 | ) | (1.07 | ) | (1.15 | ) | 14.95 | 28.46 | 117,219 | 1.26 | 1.29 | (0.16 | ) | 34 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year, if applicable and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns. |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. |
(d) | Ratios are based on average daily net assets (000s omitted) of $194,071 and $137,089 for Series I and Series II shares, respectively. |
Invesco V.I. Mid Cap Core Equity Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) and Shareholders of Invesco V.I. Mid Cap Core Equity Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Invesco V.I. Mid Cap Core Equity Fund (one of the funds constituting AIM Variable Insurance Funds (Invesco Variable Insurance Funds), hereafter referred to as the Fund) as of December 31, 2017, the related statement of operations for the year ended December 31, 2017, the statement of changes in net assets for each of the two years in the period ended December 31, 2017, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2017 (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2017 and the financial highlights for each of the five years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Funds management. Our responsibility is to express an opinion on the Funds financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2017 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, TX
February 14, 2018
We have served as the auditor of one or more of the investment companies in the Invesco/PowerShares group of investment companies since at least 1995. We have not determined the specific year we began serving as auditor.
Invesco V.I. Mid Cap Core Equity Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period July 1, 2017 through December 31, 2017.
The actual and hypothetical expenses in the examples below do not represent the effect of any fees or other expenses assessed in connection with a variable product; if they did, the expenses shown would be higher while the ending account values shown would be lower.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled Actual Expenses Paid During Period to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Funds actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs. Therefore, the hypothetical information is useful in comparing ongoing costs, and will not help you determine the relative total costs of owning different funds.
Class | Beginning Account Value (07/01/17) |
ACTUAL | HYPOTHETICAL (5% annual return before expenses) |
Annualized Expense |
||||||||||||||||||||
Ending Account Value (12/31/17)1 |
Expenses Paid During Period2 |
Ending Account Value (12/31/17) |
Expenses Paid During Period2 |
|||||||||||||||||||||
Series I |
$ | 1,000.00 | $ | 1,070.20 | $ | 4.90 | $ | 1,020.47 | $ | 4.79 | 0.94 | % | ||||||||||||
Series II |
1,000.00 | 1,068.60 | 6.20 | 1,019.21 | 6.06 | 1.19 |
1 | The actual ending account value is based on the actual total return of the Fund for the period July 1, 2017 through December 31, 2017, after actual expenses and will differ from the hypothetical ending account value which is based on the Funds expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Funds annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half year. |
Invesco V.I. Mid Cap Core Equity Fund
Tax Information
Form 1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific states requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended December 31, 2017:
Federal and State Income Tax |
||||
Long-Term Capital Gain Distributions |
$ | 5,277,928 | ||
Corporate Dividends Received Deduction* |
100.00 | % | ||
U.S. Treasury Obligations* |
0.00 | % |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Funds fiscal year. |
Invesco V.I. Mid Cap Core Equity Fund
Trustees and Officers
The address of each trustee and officer is AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Trust), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trusts organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 1960 Trustee |
2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business
Formerly: Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US), Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) |
158 | None | ||||
Philip A. Taylor2 1954 Trustee and Senior Vice President |
2006 | Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco Aim Management Group, Inc.) (financial services holding company); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.) (registered transfer agent); Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company); Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management).
Formerly: Co-Chairman, Co-President and Co-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chief Executive Officer and President, Van Kampen Exchange Corp; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurers Series Trust (Invesco Treasurers Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurers Series Trust (Invesco Treasurers Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) (registered broker dealer); Manager, Invesco PowerShares Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco Aim Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurers Series Trust (Invesco Treasurers Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. |
158 | None |
1 | Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser. |
2 | Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser. |
Invesco V.I. Mid Cap Core Equity Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Independent Trustees | ||||||||
Bruce L. Crockett 1944 Trustee and Chair |
1993 | Chairman, Crockett Technologies Associates (technology consulting company)
Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute: Member of the Audit Committee, Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council |
158 | Director and Chairman of the Audit Committee, ALPS (Attorneys Liability Protection Society) (insurance company); Director and Member of the Audit Committee and Compensation Committee, Ferroglobe PLC (metallurgical company) | ||||
David C. Arch 1945 Trustee |
2010 | Chairman of Blistex Inc. (consumer health care products manufacturer); Member, World Presidents Organization | 158 | Board member of the Illinois Manufacturers Association | ||||
Jack M. Fields 1952 Trustee |
1997 | Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Chairman, Discovery Learning Alliance (non-profit)
Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff) (human resources provider); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives |
158 | None | ||||
Cynthia Hostetler 1962 Trustee |
2017 | Non-Executive Director and Trustee of a number of public and private business corporations
Formerly: Head of Investment Funds and Private Equity, Overseas Private Investment Corporation; President, First Manhattan Bancorporation, Inc.; Attorney, Simpson Thacher & Bartlett LLP |
158 | Vulcan Materials Company (construction materials company); Trilinc Global Impact Fund; Aberdeen Investment Funds (4 portfolios); Artio Global Investment LLC (mutual fund complex); Edgen Group, Inc. (specialized energy and infrastructure products distributor) | ||||
Eli Jones 1961 Trustee |
2016 | Professor and Dean, Mays Business School Texas A&M University
Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University; Director, Arvest Bank |
158 | Insperity, Inc. (formerly known as Administaff) (human resources provider) | ||||
Prema Mathai-Davis 1950 Trustee |
1998 | Retired. | 158 | None | ||||
Teresa M. Ressel 1962 Trustee |
2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Chief Financial Officer, Olayan America, The Olayan Group (international investor/commercial/industrial); Chief Executive Officer, UBS Securities LLC; Group Chief Operating Officer, Americas, UBS AG; Assistant Secretary for Management & Budget and CFO, US Department of the Treasury |
158 | Atlantic Power Corporation (power generation company); ON Semiconductor Corp. (semiconductor supplier) | ||||
Ann Barnett Stern 1957 Trustee |
2017 | President and Chief Executive Officer, Houston Endowment Inc. (private philanthropic institution)
Formerly: Executive Vice President and General Counsel, Texas Childrens Hospital; Attorney, Beck, Redden and Secrest, LLP; Business Law Instructor, University of St. Thomas; Attorney, Andrews & Kurth LLP |
158 | Federal Reserve Bank of Dallas | ||||
Raymond Stickel, Jr. 1944 Trustee |
2005 | Retired.
Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios); Partner, Deloitte & Touche |
158 | None | ||||
Robert C. Troccoli 1949 Trustee |
2016 | Adjunct Professor, University of Denver Daniels College of Business
Formerly: Senior Partner, KPMG LLP |
158 | None | ||||
Christopher L. Wilson 1957 Trustee |
2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Managing Partner, CT2, LLC (investing and consulting firm); President/Chief Executive Officer, Columbia Funds, Bank of America Corporation; President/Chief Executive Officer, CDC IXIS Asset Management Services, Inc.; Principal & Director of Operations, Scudder Funds, Scudder, Stevens & Clark, Inc.; Assistant Vice President, Fidelity Investments |
158 | TD Asset Management USA Inc. (mutual fund complex) (22 portfolios); ISO New England, Inc. (non-profit organization managing regional electricity market) |
Invesco V.I. Mid Cap Core Equity Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers | ||||||||
Sheri Morris 1964 President, Principal Executive Officer and Treasurer |
1999 | President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco Aim Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; and Treasurer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust and PowerShares Actively Managed Exchange-Traded Fund Trust |
N/A | N/A | ||||
Russell C. Burk 1958 Senior Vice President and Senior Officer |
2005 | Senior Vice President and Senior Officer, The Invesco Funds | N/A | N/A | ||||
John M. Zerr 1962 Senior Vice President, Chief Legal Officer and Secretary |
2006 | Director, Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Managing Director, Invesco PowerShares Capital Management LLC; Director, Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust; Manager and Secretary, Invesco Indexing LLC
Formerly: Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser); Vice President and Secretary, PBHG Funds (an investment company) and PBHG Insurance Series Fund (an investment company); Chief Operating Officer, General Counsel and Secretary, Old Mutual Investment Partners (a broker-dealer); General Counsel and Secretary, Old Mutual Fund Services (an administrator) and Old Mutual Shareholder Services (a shareholder servicing center); Executive Vice President, General Counsel and Secretary, Old Mutual Capital, Inc. (an investment adviser); and Vice President and Secretary, Old Mutual Advisors Funds (an investment company) |
N/A | N/A | ||||
Gregory G. McGreevey 1962 Senior Vice President |
2012 | Senior Managing Director, Invesco Ltd.; Director, Chairman, President, and Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President, Invesco Management Group, Inc.; Director, Invesco Mortgage Capital, Inc. and Invesco Senior Secured Management, Inc.; and Senior Vice President, The Invesco Funds
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A | ||||
Kelli Gallegos 1970 Vice President, Principal Financial Officer and Assistant Treasurer |
2008 | Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A |
Invesco V.I. Mid Cap Core Equity Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers(continued) | ||||||||
Tracy Sullivan 1962 Vice President, Chief Tax Officer and Assistant Treasurer |
2008 | Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A | ||||
Crissie M. Wisdom 1969 Anti-Money Laundering Compliance Officer |
2013 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., Invesco Management Group, Inc., The Invesco Funds, and PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp. |
N/A | N/A | ||||
Robert R. Leveille 1969 Chief Compliance Officer |
2016 | Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds
Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds |
N/A | N/A |
The Statement of Additional Information of the Trust includes additional information about the Funds Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Funds Statement of Additional Information for information on the Funds sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 |
Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Auditors PricewaterhouseCoopers LLP 1000 Louisiana Street, Suite 5800 Houston, TX 77002-5678 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2005 Market Street, Suite 2600 Philadelphia, PA 19103-7018 |
Counsel to the Independent Trustees Goodwin Procter LLP 901 New York Avenue, N.W. Washington, D.C. 20001 |
Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
Invesco V.I. Mid Cap Core Equity Fund
| ||||
Annual Report to Shareholders
|
December 31, 2017 | |||
| ||||
Invesco V.I. Mid Cap Growth Fund
|
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Funds semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The Funds Form N-Q filings are available on the SEC website, sec.gov. Copies of the Funds Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-07452 and 033-57340. The Funds most recent portfolio holdings, as filed on Form N-Q, have also been made available to insurance companies issuing variable annuity contracts and variable life insurance policies (variable products) that invest in the Fund. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/ proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
This report must be accompanied or preceded by a currently effective Fund prospectus and variable product prospectus, which contain more complete information, including sales charges and expenses. Investors should read each carefully before investing.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE |
Invesco Distributors, Inc. |
VK-VIMCG-AR-1 02082018 0953 |
Managements Discussion of Fund Performance
Invesco V.I. Mid Cap Growth Fund
Invesco V.I. Mid Cap Growth Fund
Your Funds Long-Term Performance
Results of a $10,000 Investment Oldest Share Class(es)
Fund and index data from 12/31/07
1 | Source: FactSet Research Systems Inc. |
2 | Source: Lipper Inc. |
Past performance cannot guarantee
comparable future results.
Invesco V.I. Mid Cap Growth Fund
Invesco V.I. Mid Cap Growth Funds investment objective is to seek capital growth.
∎ | Unless otherwise stated, information presented in this report is as of December 31, 2017, and is based on total net assets. |
∎ | Unless otherwise noted, all data provided by Invesco. |
Invesco V.I. Mid Cap Growth Fund
Schedule of Investments(a)
December 31, 2017
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Mid Cap Growth Fund
Investment Abbreviations:
REIT | Estate Investment Trust |
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poors. |
(b) | Non-income producing security. |
(c) | The money market fund and the Fund are affiliated by having the same investment adviser. The rate shown is the 7-day SEC standardized yield as of December 31, 2017. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Mid Cap Growth Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Mid Cap Growth Fund
Statement of Changes in Net Assets
For the years ended December 31, 2017 and 2016
2017 | 2016 | |||||||
Operations: |
||||||||
Net investment income (loss) |
$ | (1,076,145 | ) | $ | (1,268,599 | ) | ||
Net realized gain |
24,180,705 | 13,767,777 | ||||||
Change in net unrealized appreciation (depreciation) |
22,465,950 | (12,121,567 | ) | |||||
Net increase in net assets resulting from operations |
45,570,510 | 377,611 | ||||||
Distributions to shareholders from net realized gains: |
||||||||
Series l |
(6,675,715 | ) | (10,165,462 | ) | ||||
Series ll |
(7,683,442 | ) | (14,237,965 | ) | ||||
Total distributions from net realized gains |
(14,359,157 | ) | (24,403,427 | ) | ||||
Share transactionsnet: |
||||||||
Series l |
(2,907,769 | ) | 3,417,783 | |||||
Series ll |
(8,386,056 | ) | (29,982,096 | ) | ||||
Net increase (decrease) in net assets resulting from share transactions |
(11,293,825 | ) | (26,564,313 | ) | ||||
Net increase (decrease) in net assets |
19,917,528 | (50,590,129 | ) | |||||
Net assets: |
||||||||
Beginning of year |
211,726,255 | 262,316,384 | ||||||
End of year (includes undistributed net investment income (loss) of $(139,546) and $(122,052), respectively) |
$ | 231,643,783 | $ | 211,726,255 |
Notes to Financial Statements
December 31, 2017
NOTE 1Significant Accounting Policies
Invesco V.I. Mid Cap Growth Fund (the Fund) is a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Trust). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end series management investment company consisting of twenty-four separate portfolios, (each constituting a Fund). The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each Fund or class will be voted on exclusively by the shareholders of such Fund or class. Current Securities and Exchange Commission (SEC) guidance, however, requires participating insurance companies offering separate accounts to vote shares proportionally in accordance with the instructions of the contract owners whose investments are funded by shares of each Fund or class.
The Funds investment objective is to seek capital growth.
The Fund currently offers two classes of shares, Series I and Series II, both of which are offered to insurance company separate accounts funding variable annuity contracts and variable life insurance policies (variable products).
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946, Financial Services Investment Companies.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations Securities, including restricted securities, are valued according to the following policy. |
A security listed or traded on an exchange (except convertible securities) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and asked prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and asked prices. For purposes of determining net asset value (NAV) per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (NYSE).
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end-of-day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
Debt obligations (including convertible securities) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual
Invesco V.I. Mid Cap Growth Fund
trading characteristics and other market data. Pricing services generally value debt obligations assuming orderly transactions of institutional round lot size, but a fund may hold or transact in the same securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Foreign securities (including foreign exchange contracts) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that the investment adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trusts officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/asked quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a securitys fair value.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuers assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
B. | Securities Transactions and Investment Income Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any) is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Funds net asset value and, accordingly, they reduce the Funds total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and the Statement of Changes in Net Assets, or the net investment income per share and the ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. | Country Determination For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuers securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
D. | Distributions Distributions from net investment income and net realized capital gain, if any, are generally declared and paid to separate accounts of participating insurance companies annually and recorded on the ex-dividend date. |
E. | Federal Income Taxes The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the Internal Revenue Code), necessary to qualify as a regulated investment company and to distribute substantially all of the Funds taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. |
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Funds uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
Invesco V.I. Mid Cap Growth Fund
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
F. | Expenses Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
G. | Accounting Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
H. | Indemnifications Under the Trusts organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Funds servicing agreements, that contain a variety of indemnification clauses. The Funds maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
I. | Securities Lending The Fund may lend portfolio securities having a market value up to one-third of the Funds total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily by the securities lending provider. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its sponsored agencies. Cash collateral received in connection with these loans is invested in short-term money market instruments or affiliated money market funds and is shown as such on the Schedule of Investments. The Fund bears the risk of loss with respect to the investment of collateral. It is the Funds policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. When loaning securities, the Fund retains certain benefits of owning the securities, including the economic equivalent of dividends or interest generated by the security. Lending securities entails a risk of loss to the Fund if, and to the extent that, the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower failed to return the securities. The securities loaned are subject to termination at the option of the borrower or the Fund. Upon termination, the borrower will return to the Fund the securities loaned and the Fund will return the collateral. Upon the failure of the borrower to return the securities, collateral may be liquidated and the securities may be purchased on the open market to replace the loaned securities. The Fund could experience delays and costs in gaining access to the collateral and the securities may lose value during the delay which could result in potential losses to the Fund. Some of these losses may be indemnified by the lending agent. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to any loss on the collateral invested. Dividends received on cash collateral investments for securities lending transactions, which are net of compensation to counterparties, are included in Dividends from affiliated money market funds on the Statement of Operations. The aggregate value of securities out on loan, if any, is shown as a footnote on the Statement of Assets and Liabilities. |
J. | Foreign Currency Translations Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Funds books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. |
The Fund may invest in foreign securities, which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests and are shown in the Statement of Operations.
K. | Forward Foreign Currency Contracts The Fund may engage in foreign currency transactions either on a spot (i.e. for prompt delivery and settlement) basis, or through forward foreign currency contracts, to manage or minimize currency or exchange rate risk. |
The Fund may also enter into forward foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to lock in the U.S. dollar price of that security, or the Fund may also enter into forward foreign currency contracts that do not provide for physical settlement of the two currencies, but instead are settled by a single cash payment calculated as the difference between the agreed upon exchange rate and the spot rate at settlement based upon an agreed upon notional amount (non-deliverable forwards). The Fund will set aside liquid assets in an amount equal to the daily mark-to-market obligation for forward foreign currency contracts.
A forward foreign currency contract is an obligation between two parties (Counterparties) to purchase or sell a specific currency for an agreed-upon price at a future date. The use of forward foreign currency contracts does not eliminate fluctuations in the price of the underlying securities the Fund owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statement of Operations. The primary risks associated with forward foreign currency contracts include failure of the Counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities.
Invesco V.I. Mid Cap Growth Fund
NOTE 2Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the Adviser or Invesco). Under the terms of the investment advisory agreement, the Fund accrues daily and pays monthly an advisory fee to the Adviser based on the annual rate of the Funds average daily net assets as follows:
Average Daily Net Assets | Rate | |||
First $500 million |
0.75% | |||
Next $500 million |
0.70% | |||
Over $1 billion |
0.65% |
For the year ended December 31, 2017, the effective advisory fees incurred by the Fund was 0.75%.
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. and separate sub-advisory agreements with Invesco PowerShares Capital Management LLC and Invesco Asset Management (India) Private Limited (collectively, the Affiliated Sub-Advisers) the Adviser, not the Fund, will pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2018, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Series I shares to 2.00% and Series II shares to 2.25% of average daily net assets (the expense limits). In determining the Advisers obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on June 30, 2018. During its term, the fee waiver agreement cannot be terminated or amended to increase expense limits or reduce the advisory fee waiver without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
Further, the Adviser has contractually agreed, through at least June 30, 2019, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash (excluding investments of cash collateral from securities lending) in such affiliated money market funds.
For the year ended December 31, 2017, the Adviser waived advisory fees of $3,338.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco a fee for costs incurred in providing accounting services and fund administrative services to the Fund and to reimburse Invesco for fees paid to insurance companies that have agreed to provide certain administrative services to the Fund. These administrative services provided by the insurance companies may include, among other things: maintenance of master accounts with the Fund; tracking, recording and transmitting net purchase and redemption orders for Fund shares; maintaining and preserving records related to the purchase, redemption and other account activity of variable product owners; distributing copies of Fund documents such as prospectuses, proxy materials and periodic reports, to variable product owners, and responding to inquiries from variable product owners about the Fund. Pursuant to such agreement, for the year ended December 31, 2017, Invesco was paid $57,559 for accounting and fund administrative services and was reimbursed $342,266 for fees paid to insurance companies.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (IIS) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. For the year ended December 31, 2017, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
The Trust has entered into a master distribution agreement with Invesco Distributors, Inc. (IDI) to serve as the distributor for the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Funds Series II shares (the Plan). The Fund, pursuant to the Plan, pays IDI compensation at the annual rate of 0.25% of the Funds average daily net assets of Series II shares. The fees are accrued daily and paid monthly. Of the Plan payments, up to 0.25% of the average daily net assets of the Series II shares may be paid to insurance companies who furnish continuing personal shareholder services to customers who purchase and own Series II shares of the Fund. For the year ended December 31, 2017, expenses incurred under the Plan are detailed in the Statement of Operations as Distribution fees.
For the year ended December 31, 2017, the Fund incurred $1,949 in brokerage commissions with Invesco Capital Markets, Inc., an affiliate of the Adviser and IDI, for portfolio transactions executed on behalf of the Fund.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
NOTE 3Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investments assigned level:
Level 1 | Prices are determined using quoted prices in an active market for identical assets. |
Level 2 | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Level 3 | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Funds own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
Invesco V.I. Mid Cap Growth Fund
The following is a summary of the tiered valuation input levels, as of December 31, 2017. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
The Funds policy is to recognize transfers in and out of the valuation levels as of the end of the reporting period. During the year ended December 31, 2017, there were no material transfers between valuation levels.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Investment in Securities | ||||||||||||||||
Common Stocks & Other Equity Interests |
$ | 229,992,617 | $ | 1,565,493 | $ | | $ | 231,558,110 | ||||||||
Money Market Funds |
3,022 | | | 3,022 | ||||||||||||
Total Investments |
$ | 229,995,639 | $ | 1,565,493 | $ | | $ | 231,561,132 |
NOTE 4Security Transactions with Affiliated Funds
The Fund is permitted to purchase or sell securities from or to certain other Invesco Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment adviser (or affiliated investment advisers), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, for the year ended December 31, 2017, the Fund engaged in securities sales of $176,372, which resulted in net realized gains (losses) of $(19,096).
NOTE 5Trustees and Officers Fees and Benefits
Trustees and Officers Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees and Officers Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees were eligible to participate in a retirement plan that provided for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees and Officers Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 6Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period-end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 7Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended December 31, 2017 and 2016:
2017 | 2016 | |||||||
Long-term capital gain |
$ | 14,359,157 | $ | 24,403,427 |
Tax Components of Net Assets at Period-End:
2017 | ||||
Undistributed long-term gain |
$ | 23,382,162 | ||
Net unrealized appreciation investments |
61,004,270 | |||
Net unrealized appreciation (depreciation) foreign currencies |
(26,359 | ) | ||
Temporary book/tax differences |
(113,132 | ) | ||
Shares of beneficial interest |
147,396,842 | |||
Total net assets |
$ | 231,643,783 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Funds net unrealized appreciation difference is attributable primarily to wash sales.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Funds temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
Invesco V.I. Mid Cap Growth Fund
The Fund does not have a capital loss carryforward as of December 31, 2017.
NOTE 8Investment Transactions
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended December 31, 2017 was $103,963,003 and $128,739,123, respectively. Cost of investments, including any derivatives, on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investments on a Tax Basis | ||||
Aggregate unrealized appreciation of investments |
$ | 64,051,856 | ||
Aggregate unrealized (depreciation) of investments |
(3,047,586 | ) | ||
Net unrealized appreciation of investments |
$ | 61,004,270 |
Cost of investments for tax purposes is $170,556,862.
NOTE 9Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of net operating losses, on December 31, 2017, undistributed net investment income (loss) was increased by $1,058,651, undistributed net realized gain was decreased by $767,906 and shares of beneficial interest was decreased by $290,745. This reclassification had no effect on the net assets of the Fund.
NOTE 10Share Information
Summary of Share Activity | ||||||||||||||||
Years ended December 31, | ||||||||||||||||
2017(a) | 2016 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: |
||||||||||||||||
Series I |
2,110,516 | $ | 11,337,794 | 3,420,749 | $ | 17,586,771 | ||||||||||
Series II |
1,772,258 | 9,394,698 | 4,122,162 | 21,135,860 | ||||||||||||
Issued as reinvestment of dividends: |
||||||||||||||||
Series I |
1,252,479 | 6,675,715 | 2,033,092 | 10,165,462 | ||||||||||||
Series II |
1,463,513 | 7,683,442 | 2,882,179 | 14,237,965 | ||||||||||||
Reacquired: |
||||||||||||||||
Series I |
(3,864,213 | ) | (20,921,278 | ) | (4,780,869 | ) | (24,334,450 | ) | ||||||||
Series II |
(4,767,695 | ) | (25,464,196 | ) | (13,091,408 | ) | (65,355,921 | ) | ||||||||
Net increase (decrease) in share activity |
(2,033,142 | ) | $ | (11,293,825 | ) | (5,414,095 | ) | $ | (26,564,313 | ) |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 55% of the outstanding shares of the Fund. The Fund and the Funds principal underwriter or adviser, are parties to participation agreements with these entities whereby these entities sell units of interest in separate accounts funding variable products that are invested in the Fund. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
Invesco V.I. Mid Cap Growth Fund
NOTE 11Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Net asset value, beginning of period |
Net investment income (loss)(a) |
Net gains on securities (both realized and unrealized) |
Total from investment operations |
Dividends from net investment income |
Distributions from net realized gains |
Total distributions |
Net asset value, end of period |
Total return(b) |
Net assets, end of period (000s omitted) |
Ratio
of expenses to average net assets with fee waivers and/or expenses absorbed |
Ratio of expenses to average net assets without fee waivers and/or expenses absorbed |
Ratio of net investment income (loss) to average net assets |
Portfolio turnover(c) |
|||||||||||||||||||||||||||||||||||||||||||
Series I |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/17 |
$ | 4.89 | $ | (0.02 | ) | $ | 1.10 | $ | 1.08 | $ | | $ | (0.35 | ) | $ | (0.35 | ) | $ | 5.62 | 22.49 | % | $ | 109,197 | 1.00 | %(d) | 1.00 | %(d) | (0.34 | )%(d) | 46 | % | |||||||||||||||||||||||||
Year ended 12/31/16 |
5.38 | (0.02 | ) | 0.07 | 0.05 | | (0.54 | ) | (0.54 | ) | 4.89 | 0.76 | 97,444 | 1.03 | 1.03 | (0.39 | ) | 60 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 |
5.78 | (0.02 | ) | 0.08 | 0.06 | | (0.46 | ) | (0.46 | ) | 5.38 | 1.21 | 103,632 | 1.07 | 1.07 | (0.33 | ) | 62 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 |
5.35 | (0.02 | ) | 0.45 | 0.43 | | | | 5.78 | 8.04 | 106,390 | 1.07 | 1.07 | (0.36 | ) | 71 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 |
3.92 | (0.02 | ) | 1.47 | 1.45 | (0.02 | ) | | (0.02 | ) | 5.35 | 37.01 | 115,319 | 1.08 | 1.08 | (0.41 | ) | 76 | ||||||||||||||||||||||||||||||||||||||
Series II |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/17 |
4.83 | (0.03 | ) | 1.08 | 1.05 | | (0.35 | ) | (0.35 | ) | 5.53 | 22.14 | 122,447 | 1.25 | (d) | 1.25 | (d) | (0.59 | )(d) | 46 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/16 |
5.33 | (0.03 | ) | 0.07 | 0.04 | | (0.54 | ) | (0.54 | ) | 4.83 | 0.57 | 114,282 | 1.28 | 1.28 | (0.64 | ) | 60 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 |
5.74 | (0.03 | ) | 0.08 | 0.05 | | (0.46 | ) | (0.46 | ) | 5.33 | 1.04 | 158,684 | 1.32 | 1.32 | (0.58 | ) | 62 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 |
5.33 | (0.03 | ) | 0.44 | 0.41 | | | | 5.74 | 7.69 | 162,299 | 1.32 | 1.32 | (0.61 | ) | 71 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 |
3.91 | (0.03 | ) | 1.46 | 1.43 | (0.01 | ) | | (0.01 | ) | 5.33 | 36.60 | 172,478 | 1.33 | 1.33 | (0.66 | ) | 76 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year, if applicable, and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns. |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. |
(d) | Ratios are based on average daily net assets (000s omitted) of $106,745 and $121,774 for Series I and Series II shares, respectively. |
Invesco V.I. Mid Cap Growth Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) and Shareholders of Invesco V.I. Mid Cap Growth Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Invesco V.I. Mid Cap Growth Fund (one of the funds constituting AIM Variable Insurance Funds (Invesco Variable Insurance Funds), hereafter referred to as the Fund) as of December 31, 2017, the related statement of operations for the year ended December 31, 2017, the statement of changes in net assets for each of the two years in the period ended December 31, 2017, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2017 (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2017 and the financial highlights for each of the five years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Funds management. Our responsibility is to express an opinion on the Funds financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2017 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, TX
February 14, 2018
We have served as the auditor of one or more of the investment companies in the Invesco/PowerShares group of investment companies since at least 1995. We have not determined the specific year we began serving as auditor.
Invesco V.I. Mid Cap Growth Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period July 1, 2017 through December 31, 2017.
The actual and hypothetical expenses in the examples below do not represent the effect of any fees or other expenses assessed in connection with a variable product; if they did, the expenses shown would be higher while the ending account values shown would be lower.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled Actual Expenses Paid During Period to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Funds actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs. Therefore, the hypothetical information is useful in comparing ongoing costs, and will not help you determine the relative total costs of owning different funds.
Class | Beginning Account Value (07/01/17) |
ACTUAL | HYPOTHETICAL (5% annual return before |
Annualized Expense Ratio |
||||||||||||||||||||
Ending Account Value (12/31/17)1 |
Expenses Paid During Period2 |
Ending Account Value (12/31/17) |
Expenses Paid During Period2 |
|||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 1,075.40 | $ | 5.18 | $ | 1,020.21 | $ | 5.04 | 0.99 | % | ||||||||||||
Series II | 1,000.00 | 1,074.60 | 6.48 | 1,018.95 | 6.31 | 1.24 |
1 | The actual ending account value is based on the actual total return of the Fund for the period July 1, 2017 through December 31, 2017, after actual expenses and will differ from the hypothetical ending account value which is based on the Funds expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Funds annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half year. |
Invesco V.I. Mid Cap Growth Fund
Tax Information
Form 1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific states requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended December 31, 2017:
Federal and State Income Tax |
||||
Long-Term Capital Gain Distributions |
$ | 14,359,157 | ||
Corporate Dividends Received Deduction* |
0.00 | % | ||
U.S. Treasury Obligations* |
0.00 | % |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Funds fiscal year. |
Invesco V.I. Mid Cap Growth Fund
Trustees and Officers
The address of each trustee and officer is AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Trust), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trusts organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 1960 Trustee |
2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business
Formerly: Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US), Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) |
158 | None | ||||
Philip A. Taylor2 1954 Trustee and Senior Vice President |
2006 | Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco Aim Management Group, Inc.) (financial services holding company); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.) (registered transfer agent); Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company); Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management).
Formerly: Co-Chairman, Co-President and Co-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chief Executive Officer and President, Van Kampen Exchange Corp; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurers Series Trust (Invesco Treasurers Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurers Series Trust (Invesco Treasurers Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) (registered broker dealer); Manager, Invesco PowerShares Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco Aim Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurers Series Trust (Invesco Treasurers Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. |
158 | None |
1 | Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser. |
2 | Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser. |
Invesco V.I. Mid Cap Growth Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Independent Trustees | ||||||||
Bruce L. Crockett 1944 Trustee and Chair |
1993 | Chairman, Crockett Technologies Associates (technology consulting company)
Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute: Member of the Audit Committee, Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council |
158 | Director and Chairman of the Audit Committee, ALPS (Attorneys Liability Protection Society) (insurance company); Director and Member of the Audit Committee and Compensation Committee, Ferroglobe PLC (metallurgical company) | ||||
David C. Arch 1945 Trustee |
2010 | Chairman of Blistex Inc. (consumer health care products manufacturer); Member, World Presidents Organization | 158 | Board member of the Illinois Manufacturers Association | ||||
Jack M. Fields 1952 Trustee |
1997 | Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Chairman, Discovery Learning Alliance (non-profit)
Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff) (human resources provider); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives |
158 | None | ||||
Cynthia Hostetler 1962 Trustee |
2017 | Non-Executive Director and Trustee of a number of public and private business corporations
Formerly: Head of Investment Funds and Private Equity, Overseas Private Investment Corporation; President, First Manhattan Bancorporation, Inc.; Attorney, Simpson Thacher & Bartlett LLP |
158 | Vulcan Materials Company (construction materials company); Trilinc Global Impact Fund; Aberdeen Investment Funds (4 portfolios); Artio Global Investment LLC (mutual fund complex); Edgen Group, Inc. (specialized energy and infrastructure products distributor) | ||||
Eli Jones 1961 Trustee |
2016 | Professor and Dean, Mays Business School Texas A&M University
Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University; Director, Arvest Bank |
158 | Insperity, Inc. (formerly known as Administaff) (human resources provider) | ||||
Prema Mathai-Davis 1950 Trustee |
1998 | Retired. | 158 | None | ||||
Teresa M. Ressel 1962 Trustee |
2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Chief Financial Officer, Olayan America, The Olayan Group (international investor/commercial/industrial); Chief Executive Officer, UBS Securities LLC; Group Chief Operating Officer, Americas, UBS AG; Assistant Secretary for Management & Budget and CFO, US Department of the Treasury |
158 | Atlantic Power Corporation (power generation company); ON Semiconductor Corp. (semiconductor supplier) | ||||
Ann Barnett Stern 1957 Trustee |
2017 | President and Chief Executive Officer, Houston Endowment Inc. (private philanthropic institution)
Formerly: Executive Vice President and General Counsel, Texas Childrens Hospital; Attorney, Beck, Redden and Secrest, LLP; Business Law Instructor, University of St. Thomas; Attorney, Andrews & Kurth LLP |
158 | Federal Reserve Bank of Dallas | ||||
Raymond Stickel, Jr. 1944 Trustee |
2005 | Retired.
Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios); Partner, Deloitte & Touche |
158 | None | ||||
Robert C. Troccoli 1949 Trustee |
2016 | Adjunct Professor, University of Denver Daniels College of Business
Formerly: Senior Partner, KPMG LLP |
158 | None | ||||
Christopher L. Wilson 1957 Trustee |
2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Managing Partner, CT2, LLC (investing and consulting firm); President/Chief Executive Officer, Columbia Funds, Bank of America Corporation; President/Chief Executive Officer, CDC IXIS Asset Management Services, Inc.; Principal & Director of Operations, Scudder Funds, Scudder, Stevens & Clark, Inc.; Assistant Vice President, Fidelity Investments |
158 | TD Asset Management USA Inc. (mutual fund complex) (22 portfolios); ISO New England, Inc. (non-profit organization managing regional electricity market) |
Invesco V.I. Mid Cap Growth Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers | ||||||||
Sheri Morris 1964 President, Principal Executive Officer and Treasurer |
1999 | President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco Aim Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; and Treasurer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust and PowerShares Actively Managed Exchange-Traded Fund Trust |
N/A | N/A | ||||
Russell C. Burk 1958 Senior Vice President and Senior Officer |
2005 | Senior Vice President and Senior Officer, The Invesco Funds | N/A | N/A | ||||
John M. Zerr 1962 Senior Vice President, Chief Legal Officer and Secretary |
2006 | Director, Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Managing Director, Invesco PowerShares Capital Management LLC; Director, Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust; Manager and Secretary, Invesco Indexing LLC
Formerly: Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser); Vice President and Secretary, PBHG Funds (an investment company) and PBHG Insurance Series Fund (an investment company); Chief Operating Officer, General Counsel and Secretary, Old Mutual Investment Partners (a broker-dealer); General Counsel and Secretary, Old Mutual Fund Services (an administrator) and Old Mutual Shareholder Services (a shareholder servicing center); Executive Vice President, General Counsel and Secretary, Old Mutual Capital, Inc. (an investment adviser); and Vice President and Secretary, Old Mutual Advisors Funds (an investment company) |
N/A | N/A | ||||
Gregory G. McGreevey 1962 Senior Vice President |
2012 | Senior Managing Director, Invesco Ltd.; Director, Chairman, President, and Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President, Invesco Management Group, Inc.; Director, Invesco Mortgage Capital, Inc. and Invesco Senior Secured Management, Inc.; and Senior Vice President, The Invesco Funds
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A | ||||
Kelli Gallegos 1970 Vice President, Principal Financial Officer and Assistant Treasurer |
2008 | Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A |
Invesco V.I. Mid Cap Growth Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers(continued) | ||||||||
Tracy Sullivan 1962 Vice President, Chief Tax Officer and Assistant Treasurer |
2008 | Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A | ||||
Crissie M. Wisdom 1969 Anti-Money Laundering Compliance Officer |
2013 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., Invesco Management Group, Inc., The Invesco Funds, and PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp. |
N/A | N/A | ||||
Robert R. Leveille 1969 Chief Compliance Officer |
2016 | Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds
Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds |
N/A | N/A |
The Statement of Additional Information of the Trust includes additional information about the Funds Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Funds Statement of Additional Information for information on the Funds sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 |
Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Auditors PricewaterhouseCoopers LLP 1000 Louisiana Street, Suite 5800 Houston, TX 77002-5678 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2005 Market Street, Suite 2600 Philadelphia, PA 19103-7018 |
Counsel to the Independent Trustees Goodwin Procter LLP 901 New York Avenue, N.W. Washington, D.C. 20001 |
Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
Invesco V.I. Mid Cap Growth Fund
| ||||
Annual Report to Shareholders
|
December 31, 2017 | |||
| ||||
Invesco V.I. S&P 500 Index Fund |
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Funds semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The Funds Form N-Q filings are available on the SEC website, sec.gov. Copies of the Funds Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-07452 and 033-57340. The Funds most recent portfolio holdings, as filed on Form N-Q, have also been made available to insurance companies issuing variable annuity contracts and variable life insurance policies (variable products) that invest in the Fund. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/ proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
This report must be accompanied or preceded by a currently effective Fund prospectus and variable product prospectus, which contain more complete information, including sales charges and expenses. Investors should read each carefully before investing.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
Invesco Distributors, Inc. MS-VISPI-AR-1 02082018 0807 |
Managements Discussion of Fund Performance
Invesco V.I. S&P 500 Index Fund
Invesco V.I. S&P 500 Index Fund
Your Funds Long-Term Performance
Results of a $10,000 Investment Oldest Share Class(es)
Fund and index data from 12/31/07
1 | Source: FactSet Research Systems Inc. |
2 | Source: Lipper Inc. |
Past performance cannot guarantee
comparable future results.
Invesco V.I. S&P 500 Index Fund
Invesco V.I. S&P 500 Index Funds investment objective is to provide investment results that, before expenses, correspond to the total return (i.e., the combination of capital changes and income) of the Standard & Poors® 500 Composite Stock Price Index.
∎ | Unless otherwise stated, information presented in this report is as of December 31, 2017, and is based on total net assets. |
∎ | Unless otherwise noted, all data provided by Invesco. |
Invesco V.I. S&P 500 Index Fund
Schedule of Investments(a)
December 31, 2017
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. S&P 500 Index Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. S&P 500 Index Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. S&P 500 Index Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. S&P 500 Index Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. S&P 500 Index Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. S&P 500 Index Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. S&P 500 Index Fund
Investment Abbreviations:
REIT | Real Estate Investment Trust |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. S&P 500 Index Fund
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poors. |
(b) | All or a portion of this security was out on loan at December 31, 2017. |
(c) | Non-income producing security. |
(d) | The Funds Adviser is a subsidiary of Invesco Ltd. and therefore, Invesco Ltd. is considered to be affiliated with the Fund. The value of this security as of December 31, 2017 represented less than 1% of the Funds Net Assets. See Note 5. |
(e) | All or a portion of the value was pledged as collateral to cover margin requirements for open futures contracts. See Note 1J. |
(f) | The money market fund and the Fund are affiliated by having the same investment adviser. The rate shown is the 7-day SEC standardized yield as of December 31, 2017. |
(g) | The security has been segregated to satisfy the commitment to return the cash collateral received in securities lending transactions upon the borrowers return of the securities loaned. See Note 1I. |
Open Futures Contracts Equity Risk | ||||||||||||||||||||
Long Futures Contracts | Number of Contracts |
Expiration Month |
Notional Value |
Value | Unrealized Appreciation |
|||||||||||||||
E-Mini S&P 500 Index |
10 | March2018 | $ | 1,338,000 | $ | 5,887 | $ | 5,887 |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. S&P 500 Index Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. S&P 500 Index Fund
Statement of Changes in Net Assets
For the years ended December 31, 2017 and 2016
2017 | 2016 | |||||||
Operations: |
||||||||
Net investment income |
$ | 1,186,720 | $ | 1,467,704 | ||||
Net realized gain |
6,771,653 | 7,393,025 | ||||||
Change in net unrealized appreciation |
9,368,744 | 278,400 | ||||||
Net increase in net assets resulting from operations |
17,327,117 | 9,139,129 | ||||||
Distributions to shareholders from net investment income: |
||||||||
Series I |
(599,367 | ) | (593,221 | ) | ||||
Series ll |
(759,177 | ) | (788,172 | ) | ||||
Total distributions from net investment income |
(1,358,544 | ) | (1,381,393 | ) | ||||
Distributions to shareholders from net realized gains: |
||||||||
Series l |
(2,671,157 | ) | (2,594,662 | ) | ||||
Series ll |
(3,981,717 | ) | (4,107,826 | ) | ||||
Total distributions from net realized gains |
(6,652,874 | ) | (6,702,488 | ) | ||||
Share transactionsnet: |
||||||||
Series l |
(189,787 | ) | (1,302,813 | ) | ||||
Series ll |
(2,610,593 | ) | (6,582,220 | ) | ||||
Net increase (decrease) in net assets resulting from share transactions |
(2,800,380 | ) | (7,885,033 | ) | ||||
Net increase (decrease) in net assets |
6,515,319 | (6,829,785 | ) | |||||
Net assets: |
||||||||
Beginning of year |
87,024,767 | 93,854,552 | ||||||
End of year (includes undistributed net investment income of $1,177,613 and $1,320,667, respectively) |
$ | 93,540,086 | $ | 87,024,767 |
Notes to Financial Statements
December 31, 2017
NOTE 1Significant Accounting Policies
Invesco V.I. S&P 500 Index Fund (the Fund) is a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Trust). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end series management investment company consisting of twenty-four separate portfolios, (each constituting a Fund). The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each Fund or class will be voted on exclusively by the shareholders of such Fund or class. Current Securities and Exchange Commission (SEC) guidance, however, requires participating insurance companies offering separate accounts to vote shares proportionally in accordance with the instructions of the contract owners whose investments are funded by shares of each Fund or class.
The Funds investment objective is to provide investment results that, before expenses, correspond to the total return (i.e., the combination of capital changes and income) of the Standard & Poors 500® Composite Stock Price Index.
The Fund currently offers two classes of shares, Series I and Series II, both of which are offered to insurance company separate accounts funding variable annuity contracts and variable life insurance policies (variable products).
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946, Financial Services Investment Companies.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations Securities, including restricted securities, are valued according to the following policy. |
A security listed or traded on an exchange (except convertible securities) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and asked prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and asked prices. For purposes of determining net asset value (NAV) per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (NYSE).
Invesco V.I. S&P 500 Index Fund
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end-of-day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
Debt obligations (including convertible securities) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual trading characteristics and other market data. Pricing services generally value debt obligations assuming orderly transactions of institutional round lot size, but a fund may hold or transact in the same securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Foreign securities (including foreign exchange contracts) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that the investment adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trusts officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/asked quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a securitys fair value.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuers assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
B. | Securities Transactions and Investment Income Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any) is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Funds net asset value and, accordingly, they reduce the Funds total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and the Statement of Changes in Net Assets, or the net investment income per share and the ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. | Country Determination For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuers securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
D. | Distributions Distributions from net investment income and net realized capital gain, if any, are generally declared and paid to separate accounts of participating insurance companies annually and recorded on the ex-dividend date. |
Invesco V.I. S&P 500 Index Fund
E. | Federal Income Taxes The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the Internal Revenue Code), necessary to qualify as a regulated investment company and to distribute substantially all of the Funds taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. |
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Funds uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
F. | Expenses Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
G. | Accounting Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
H. | Indemnifications Under the Trusts organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Funds servicing agreements, that contain a variety of indemnification clauses. The Funds maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
I. | Securities Lending The Fund may lend portfolio securities having a market value up to one-third of the Funds total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily by the securities lending provider. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its sponsored agencies. Cash collateral received in connection with these loans is invested in short-term money market instruments or affiliated money market funds and is shown as such on the Schedule of Investments. The Fund bears the risk of loss with respect to the investment of collateral. It is the Funds policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. When loaning securities, the Fund retains certain benefits of owning the securities, including the economic equivalent of dividends or interest generated by the security. Lending securities entails a risk of loss to the Fund if, and to the extent that, the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower failed to return the securities. The securities loaned are subject to termination at the option of the borrower or the Fund. Upon termination, the borrower will return to the Fund the securities loaned and the Fund will return the collateral. Upon the failure of the borrower to return the securities, collateral may be liquidated and the securities may be purchased on the open market to replace the loaned securities. The Fund could experience delays and costs in gaining access to the collateral and the securities may lose value during the delay which could result in potential losses to the Fund. Some of these losses may be indemnified by the lending agent. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to any loss on the collateral invested. Dividends received on cash collateral investments for securities lending transactions, which are net of compensation to counterparties, are included in Dividends from affiliated money market funds on the Statement of Operations. The aggregate value of securities out on loan, if any, is shown as a footnote on the Statement of Assets and Liabilities. |
J. | Futures Contracts The Fund may enter into futures contracts to manage exposure to interest rate, equity and market price movements and/or currency risks. A futures contract is an agreement between two parties (Counterparties) to purchase or sell a specified underlying security, currency or commodity (or delivery of a cash settlement price, in the case of an index future) for a fixed price at a future date. The Fund currently invests only in exchange-traded futures and they are standardized as to maturity date and underlying financial instrument. Initial margin deposits required upon entering into futures contracts are satisfied by the segregation of specific securities or cash as collateral at the futures commission merchant (broker). During the period the futures contracts are open, changes in the value of the contracts are recognized as unrealized gains or losses by recalculating the value of the contracts on a daily basis. Subsequent or variation margin payments are received or made depending upon whether unrealized gains or losses are incurred. These amounts are reflected as receivables or payables on the Statement of Assets and Liabilities. When the contracts are closed or expire, the Fund recognizes a realized gain or loss equal to the difference between the proceeds from, or cost of, the closing transaction and the Funds basis in the contract. The net realized gain (loss) and the change in unrealized gain (loss) on futures contracts held during the period is included on the Statement of Operations. The primary risks associated with futures contracts are market risk and the absence of a liquid secondary market. If the Fund were unable to liquidate a futures contract and/or enter into an offsetting closing transaction, the Fund would continue to be subject to market risk with respect to the value of the contracts and continue to be required to maintain the margin deposits on the futures contracts. Futures contracts have minimal Counterparty risk since the exchanges clearinghouse, as Counterparty to all exchange-traded futures, guarantees the futures against default. Risks may exceed amounts recognized in the Statement of Assets and Liabilities. |
K. | Collateral To the extent the Fund has designated or segregated a security as collateral and that security is subsequently sold, it is the Funds practice to replace such collateral no later than the next business day. |
Invesco V.I. S&P 500 Index Fund
NOTE 2Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the Adviser or Invesco). Under the terms of the investment advisory agreement, the Fund accrues daily and pays monthly an advisory fee to the Adviser based on the annual rate of the Funds average daily net assets as follows:
Average Daily Net Assets | Rate | |||
First $2 billion |
0.12% | |||
Over $2 billion |
0.10% |
For the year ended December 31, 2017, the effective advisory fees incurred by the Fund was 0.12%.
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. and separate sub-advisory agreements with Invesco PowerShares Capital Management LLC and Invesco Asset Management (India) Private Limited (collectively, the Affiliated Sub-Advisers) the Adviser, not the Fund, will pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2018, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Series I shares to 2.00% and Series II shares to 2.25% of average daily net assets (the expense limits). In determining the Advisers obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on June 30, 2018. During its term, the fee waiver agreement cannot be terminated or amended to increase expense limits or reduce the advisory fee waiver without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
Further, the Adviser has contractually agreed, through at least June 30, 2019, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the year ended December 31, 2017, the Adviser waived advisory fees of $1,075.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco a fee for costs incurred in providing accounting services and fund administrative services to the Fund and to reimburse Invesco for fees paid to insurance companies that have agreed to provide certain administrative services to the Fund. These administrative services provided by the insurance companies may include, among other things: maintenance of master accounts with the Fund; tracking, recording and transmitting net purchase and redemption orders for Fund shares; maintaining and preserving records related to the purchase, redemption and other account activity of variable product owners; distributing copies of Fund documents such as prospectuses, proxy materials and periodic reports, to variable product owners, and responding to inquiries from variable product owners about the Fund. Pursuant to such agreement, for the year ended December 31, 2017, Invesco was paid $50,000 for accounting and fund administrative services and was reimbursed $144,400 for fees paid to insurance companies.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (IIS) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. For the year ended December 31, 2017, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
The Trust has entered into a master distribution agreement with Invesco Distributors, Inc. (IDI) to serve as the distributor for the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Funds Series II shares (the Plan). The Fund, pursuant to the Plan, pays IDI compensation at the annual rate of 0.25% of the Funds average daily net assets of Series II shares. The fees are accrued daily and paid monthly. Of the Plan payments, up to 0.25% of the average daily net assets of the Series II shares may be paid to insurance companies who furnish continuing personal shareholder services to customers who purchase and own Series II shares of the Fund. For the year ended December 31, 2017, expenses incurred under the Plan are detailed in the Statement of Operations as Distribution fees.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
NOTE 3Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investments assigned level:
Level 1 | Prices are determined using quoted prices in an active market for identical assets. |
Level 2 | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Level 3 | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Funds own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
Invesco V.I. S&P 500 Index Fund
The following is a summary of the tiered valuation input levels, as of December 31, 2017. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
The Funds policy is to recognize transfers in and out of the valuation levels as of the end of the reporting period. During the year ended December 31, 2017, there were no material transfers between valuation levels.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Investments in Securities | ||||||||||||||||
Common Stocks & Other Equity Interests |
$ | 92,699,266 | $ | | $ | | $ | 92,699,266 | ||||||||
Money Market Funds |
1,514,430 | | | 1,514,430 | ||||||||||||
Total Investments in Securities |
94,213,696 | | | 94,213,696 | ||||||||||||
Other Investments Assets* | ||||||||||||||||
Futures Contracts* |
5,887 | | | 5,887 | ||||||||||||
Total Investments |
$ | 94,219,583 | $ | | $ | | $ | 94,219,583 |
* | Unrealized appreciation. |
NOTE 4Derivative Investments
The Fund may enter into an International Swaps and Derivatives Association Master Agreement (ISDA Master Agreement) under which a fund may trade OTC derivatives. An OTC transaction entered into under an ISDA Master Agreement typically involves a collateral posting arrangement, payment netting provisions and close-out netting provisions. These netting provisions allow for reduction of credit risk through netting of contractual obligations. The enforceability of the netting provisions of the ISDA Master Agreement depends on the governing law of the ISDA Master Agreement, among other factors.
For financial reporting purposes, the Fund does not offset OTC derivative assets or liabilities that are subject to ISDA Master Agreements in the Statement of Assets and Liabilities.
Value of Derivative Investments at Period-End
The table below summarizes the value of the Funds derivative investments, detailed by primary risk exposure, held as of December 31, 2017:
Value | ||||
Derivative Assets | Equity Risk | |||
Unrealized appreciation on futures contracts Exchange-Traded(a) |
$ | 5,887 | ||
Derivatives not subject to master netting agreements |
(5,887 | ) | ||
Total Derivative Assets subject to master netting agreements |
$ | |
(a) | Only current days variation margin receivable (payable) is reported within the Statement of Assets and Liabilities. |
Effect of Derivative Investments for the year ended December 31, 2017
The table below summarizes the gains (losses) on derivative investments, detailed by primary risk exposure, recognized in earnings during the period:
Location of Gain on Statement of Operations |
||||
Equity Risk | ||||
Realized Gain: |
||||
Futures contracts |
$ | 189,177 | ||
Change in Net Unrealized Appreciation: |
||||
Futures contracts |
10,834 | |||
Total |
$ | 200,011 |
The table below summarizes the average notional value of futures contracts outstanding during the period.
Futures Contracts |
||||
Average notional value |
$ | 1,127,774 |
NOTE 5Investments in Affiliates
The Funds Adviser is a subsidiary of Invesco Ltd. and therefore, Invesco Ltd. is considered to be affiliated with the Fund. The following is a summary of the transactions in, and earnings from, investments in Invesco Ltd. for the year ended December 31, 2017.
Value 12/31/16 |
Purchases at Cost |
Proceeds from Sales |
Change in Unrealized Appreciation |
Realized Gain |
Value 12/31/17 |
Dividend Income |
||||||||||||||||||||||
Invesco Ltd. |
$ | 55,643 | $ | | $ | (5,594 | ) | $ | 9,525 | $ | 1,192 | $ | 60,766 | $ | 1,996 |
Invesco V.I. S&P 500 Index Fund
NOTE 6Trustees and Officers Fees and Benefits
Trustees and Officers Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees and Officers Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees were eligible to participate in a retirement plan that provided for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees and Officers Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 7Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period-end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 8Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended December 31, 2017 and 2016:
2017 | 2016 | |||||||
Ordinary income |
$ | 1,438,937 | $ | 1,381,393 | ||||
Long-term capital gain |
6,572,481 | 6,702,488 | ||||||
Total distributions |
$ | 8,011,418 | $ | 8,083,881 |
Tax Components of Net Assets at Period-End:
2017 | ||||
Undistributed ordinary income |
$ | 1,342,841 | ||
Undistributed long-term gain |
6,214,273 | |||
Net unrealized appreciation investments |
61,836,445 | |||
Temporary book/tax differences |
(35,666 | ) | ||
Shares of beneficial interest |
24,182,193 | |||
Total net assets |
$ | 93,540,086 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Funds net unrealized appreciation difference is attributable primarily to wash sales.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Funds temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund does not have a capital loss carryforward as of December 31, 2017.
NOTE 9Investment Transactions
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended December 31, 2017 was $2,529,894 and $12,174,305, respectively. Cost of investments, including any derivatives, on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investments on a Tax Basis | ||||
Aggregate unrealized appreciation of investments |
$ | 62,605,453 | ||
Aggregate unrealized (depreciation) of investments |
(769,008 | ) | ||
Net unrealized appreciation of investments |
$ | 61,836,445 |
Cost of investments for tax purposes is $32,383,138.
Invesco V.I. S&P 500 Index Fund
NOTE 10Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of real estate investment trusts, on December 31, 2017, undistributed net investment income was increased by $28,770, undistributed net realized gain was decreased by $28,095 and shares of beneficial interest was decreased by $675. This reclassification had no effect on the net assets of the Fund.
NOTE 11Share Information
Summary of Share Activity | ||||||||||||||||
Years ended December 31, | ||||||||||||||||
2017(a) | 2016 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: |
||||||||||||||||
Series I |
84,246 | $ | 1,475,450 | 48,001 | $ | 796,342 | ||||||||||
Series II |
155,899 | 2,840,138 | 177,111 | 2,959,359 | ||||||||||||
Issued as reinvestment of dividends: |
||||||||||||||||
Series I |
189,428 | 3,269,530 | 196,239 | 3,186,916 | ||||||||||||
Series II |
275,954 | 4,740,894 | 302,783 | 4,895,999 | ||||||||||||
Reacquired: |
||||||||||||||||
Series I |
(273,913 | ) | (4,934,767 | ) | (316,145 | ) | (5,286,071 | ) | ||||||||
Series II |
(570,729 | ) | (10,191,625 | ) | (884,680 | ) | (14,437,578 | ) | ||||||||
Net increase (decrease) in share activity |
(139,115 | ) | $ | (2,800,380 | ) | (476,691 | ) | $ | (7,885,033 | ) |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 92% of the outstanding shares of the Fund. The Fund and the Funds principal underwriter or adviser, are parties to participation agreements with these entities whereby these entities sell units of interest in separate accounts funding variable products that are invested in the Fund. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
NOTE 12Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Net asset value, beginning of period |
Net investment income(a) |
Net gains (losses) on securities (both realized and unrealized) |
Total from investment operations |
Dividends from net investment income |
Distributions from net realized gains |
Total distributions |
Net asset value, end of period |
Total return(b) |
Net assets, end of period (000s omitted) |
Ratio
of expenses to average net assets with fee waivers and/or expenses absorbed |
Ratio of expenses to average net assets without fee waivers and/or expenses absorbed |
Ratio of net investment income to average net assets |
Portfolio turnover(c) |
|||||||||||||||||||||||||||||||||||||||||||
Series I |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/17 |
$ | 16.78 | $ | 0.26 | $ | 3.18 | $ | 3.44 | $ | (0.31 | ) | $ | (1.38 | ) | $ | (1.69 | ) | $ | 18.53 | 21.26 | % | $ | 38,450 | 0.48 | %(d) | 0.48 | %(d) | 1.46 | %(d) | 3 | % | |||||||||||||||||||||||||
Year ended 12/31/16 |
16.58 | 0.30 | 1.55 | 1.85 | (0.31 | ) | (1.34 | ) | (1.65 | ) | 16.78 | 11.45 | 34,812 | 0.41 | 0.41 | 1.81 | 4 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 |
18.52 | 0.30 | (0.24 | ) | 0.06 | (0.33 | ) | (1.67 | ) | (2.00 | ) | 16.58 | 1.03 | 35,586 | 0.41 | 0.41 | 1.66 | 7 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 |
16.66 | 0.28 | 1.92 | 2.20 | (0.34 | ) | | (0.34 | ) | 18.52 | 13.32 | 37,685 | 0.41 | 0.41 | 1.62 | 3 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 |
12.89 | 0.24 | 3.84 | 4.08 | (0.31 | ) | | (0.31 | ) | 16.66 | 31.91 | 36,853 | 0.41 | 0.41 | 1.63 | 4 | ||||||||||||||||||||||||||||||||||||||||
Series II |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/17 |
16.69 | 0.22 | 3.17 | 3.39 | (0.27 | ) | (1.38 | ) | (1.65 | ) | 18.43 | 21.00 | 55,090 | 0.73 | (d) | 0.73 | (d) | 1.21 | (d) | 3 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/16 |
16.49 | 0.26 | 1.54 | 1.80 | (0.26 | ) | (1.34 | ) | (1.60 | ) | 16.69 | 11.20 | 52,212 | 0.66 | 0.66 | 1.56 | 4 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 |
18.43 | 0.25 | (0.24 | ) | 0.01 | (0.28 | ) | (1.67 | ) | (1.95 | ) | 16.49 | 0.72 | 58,268 | 0.66 | 0.66 | 1.41 | 7 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 |
16.58 | 0.24 | 1.90 | 2.14 | (0.29 | ) | | (0.29 | ) | 18.43 | 13.02 | 63,667 | 0.66 | 0.66 | 1.37 | 3 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 |
12.83 | 0.20 | 3.82 | 4.02 | (0.27 | ) | | (0.27 | ) | 16.58 | 31.55 | 67,793 | 0.66 | 0.66 | 1.38 | 4 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year, if applicable, and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns. |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. |
(d) | Ratios are based on average daily net assets (000s omitted) of $36,742 and $53,681 for Series I and Series II shares, respectively. |
Invesco V.I. S&P 500 Index Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
and Shareholders of Invesco V.I. S&P 500 Index Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Invesco V.I. S&P 500 Index Fund (one of the funds constituting AIM Variable Insurance Funds (Invesco Variable Insurance Funds), hereafter referred to as the Fund) as of December 31, 2017, the related statement of operations for the year ended December 31, 2017, the statement of changes in net assets for each of the two years in the period ended December 31, 2017, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2017 (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2017 and the financial highlights for each of the five years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Funds management. Our responsibility is to express an opinion on the Funds financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2017 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, TX
February 14, 2018
We have served as the auditor of one or more of the investment companies in the Invesco/PowerShares group of investment companies since at least 1995. We have not determined the specific year we began serving as auditor.
Invesco V.I. S&P 500 Index Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period July 1, 2017 through December 31, 2017.
The actual and hypothetical expenses in the examples below do not represent the effect of any fees or other expenses assessed in connection with a variable product; if they did, the expenses shown would be higher while the ending account values shown would be lower.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled Actual Expenses Paid During Period to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Funds actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs. Therefore, the hypothetical information is useful in comparing ongoing costs, and will not help you determine the relative total costs of owning different funds.
Class |
Beginning |
ACTUAL | HYPOTHETICAL expenses) |
Annualized Ratio |
||||||||||||||||||||
Ending Account Value (12/31/17)1 |
Expenses Paid During Period2 |
Ending Account Value (12/31/17) |
Expenses Paid During Period2 |
|||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 1,111.80 | $ | 2.50 | $ | 1,022.84 | $ | 2.40 | 0.47 | % | ||||||||||||
Series II | 1,000.00 | 1,110.20 | 3.83 | 1,021.58 | 3.67 | 0.72 |
1 | The actual ending account value is based on the actual total return of the Fund for the period July 1, 2017 through December 31, 2017, after actual expenses and will differ from the hypothetical ending account value which is based on the Funds expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Funds annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half year. |
Invesco V.I. S&P 500 Index Fund
Tax Information
Form 1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific states requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended December 31, 2017:
Federal and State Income Tax |
||||
Long-Term Capital Gain Distributions |
$ | 6,572,481 | ||
Corporate Dividends Received Deduction* |
100 | % | ||
U.S. Treasury Obligations* |
0.00 | % |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Funds fiscal year. |
Invesco V.I. S&P 500 Index Fund
Trustees and Officers
The address of each trustee and officer is AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Trust), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trusts organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 1960 Trustee |
2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business
Formerly: Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US), Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) |
158 | None | ||||
Philip A. Taylor2 1954 Trustee and Senior Vice President |
2006 | Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco Aim Management Group, Inc.) (financial services holding company); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.) (registered transfer agent); Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company); Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management).
Formerly: Co-Chairman, Co-President and Co-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chief Executive Officer and President, Van Kampen Exchange Corp; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurers Series Trust (Invesco Treasurers Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurers Series Trust (Invesco Treasurers Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) (registered broker dealer); Manager, Invesco PowerShares Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco Aim Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurers Series Trust (Invesco Treasurers Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. |
158 | None |
1 | Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser. |
2 | Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser. |
Invesco V.I. S&P 500 Index Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Independent Trustees | ||||||||
Bruce L. Crockett 1944 Trustee and Chair |
1993 | Chairman, Crockett Technologies Associates (technology consulting company)
Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute: Member of the Audit Committee, Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council |
158 | Director and Chairman of the Audit Committee, ALPS (Attorneys Liability Protection Society) (insurance company); Director and Member of the Audit Committee and Compensation Committee, Ferroglobe PLC (metallurgical company) | ||||
David C. Arch 1945 Trustee |
2010 | Chairman of Blistex Inc. (consumer health care products manufacturer); Member, World Presidents Organization | 158 | Board member of the Illinois Manufacturers Association | ||||
Jack M. Fields 1952 Trustee |
1997 | Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Chairman, Discovery Learning Alliance (non-profit)
Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff) (human resources provider); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives |
158 | None | ||||
Cynthia Hostetler 1962 Trustee |
2017 | Non-Executive Director and Trustee of a number of public and private business corporations
Formerly: Head of Investment Funds and Private Equity, Overseas Private Investment Corporation; President, First Manhattan Bancorporation, Inc.; Attorney, Simpson Thacher & Bartlett LLP |
158 | Vulcan Materials Company (construction materials company); Trilinc Global Impact Fund; Aberdeen Investment Funds (4 portfolios); Artio Global Investment LLC (mutual fund complex); Edgen Group, Inc. (specialized energy and infrastructure products distributor) | ||||
Eli Jones 1961 Trustee |
2016 | Professor and Dean, Mays Business School Texas A&M University
Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University; Director, Arvest Bank |
158 | Insperity, Inc. (formerly known as Administaff) (human resources provider) | ||||
Prema Mathai-Davis 1950 Trustee |
1998 | Retired. | 158 | None | ||||
Teresa M. Ressel 1962 Trustee |
2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Chief Financial Officer, Olayan America, The Olayan Group (international investor/commercial/industrial); Chief Executive Officer, UBS Securities LLC; Group Chief Operating Officer, Americas, UBS AG; Assistant Secretary for Management & Budget and CFO, US Department of the Treasury |
158 | Atlantic Power Corporation (power generation company); ON Semiconductor Corp. (semiconductor supplier) | ||||
Ann Barnett Stern 1957 Trustee |
2017 | President and Chief Executive Officer, Houston Endowment Inc. (private philanthropic institution)
Formerly: Executive Vice President and General Counsel, Texas Childrens Hospital; Attorney, Beck, Redden and Secrest, LLP; Business Law Instructor, University of St. Thomas; Attorney, Andrews & Kurth LLP |
158 | Federal Reserve Bank of Dallas | ||||
Raymond Stickel, Jr. 1944 Trustee |
2005 | Retired.
Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios); Partner, Deloitte & Touche |
158 | None | ||||
Robert C. Troccoli 1949 Trustee |
2016 | Adjunct Professor, University of Denver Daniels College of Business
Formerly: Senior Partner, KPMG LLP |
158 | None | ||||
Christopher L. Wilson 1957 Trustee |
2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Managing Partner, CT2, LLC (investing and consulting firm); President/Chief Executive Officer, Columbia Funds, Bank of America Corporation; President/Chief Executive Officer, CDC IXIS Asset Management Services, Inc.; Principal & Director of Operations, Scudder Funds, Scudder, Stevens & Clark, Inc.; Assistant Vice President, Fidelity Investments |
158 | TD Asset Management USA Inc. (mutual fund complex) (22 portfolios); ISO New England, Inc. (non-profit organization managing regional electricity market) |
Invesco V.I. S&P 500 Index Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers | ||||||||
Sheri Morris 1964 President, Principal Executive Officer and Treasurer |
1999 | President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco Aim Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; and Treasurer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust and PowerShares Actively Managed Exchange-Traded Fund Trust |
N/A | N/A | ||||
Russell C. Burk 1958 Senior Vice President and Senior Officer |
2005 | Senior Vice President and Senior Officer, The Invesco Funds | N/A | N/A | ||||
John M. Zerr 1962 Senior Vice President, Chief Legal Officer and Secretary |
2006 | Director, Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Managing Director, Invesco PowerShares Capital Management LLC; Director, Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust; Manager and Secretary, Invesco Indexing LLC
Formerly: Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser); Vice President and Secretary, PBHG Funds (an investment company) and PBHG Insurance Series Fund (an investment company); Chief Operating Officer, General Counsel and Secretary, Old Mutual Investment Partners (a broker-dealer); General Counsel and Secretary, Old Mutual Fund Services (an administrator) and Old Mutual Shareholder Services (a shareholder servicing center); Executive Vice President, General Counsel and Secretary, Old Mutual Capital, Inc. (an investment adviser); and Vice President and Secretary, Old Mutual Advisors Funds (an investment company) |
N/A | N/A | ||||
Gregory G. McGreevey 1962 Senior Vice President |
2012 | Senior Managing Director, Invesco Ltd.; Director, Chairman, President, and Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President, Invesco Management Group, Inc.; Director, Invesco Mortgage Capital, Inc. and Invesco Senior Secured Management, Inc.; and Senior Vice President, The Invesco Funds
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A | ||||
Kelli Gallegos 1970 Vice President, Principal Financial Officer and Assistant Treasurer |
2008 | Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A |
Invesco V.I. S&P 500 Index Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers(continued) | ||||||||
Tracy Sullivan 1962 Vice President, Chief Tax Officer and Assistant Treasurer |
2008 | Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A | ||||
Crissie M. Wisdom 1969 Anti-Money Laundering Compliance Officer |
2013 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., Invesco Management Group, Inc., The Invesco Funds, and PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp. |
N/A | N/A | ||||
Robert R. Leveille 1969 Chief Compliance Officer |
2016 | Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds
Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds |
N/A | N/A |
The Statement of Additional Information of the Trust includes additional information about the Funds Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Funds Statement of Additional Information for information on the Funds sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 |
Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Auditors PricewaterhouseCoopers LLP 1000 Louisiana Street, Suite 5800 Houston, TX 77002-5678 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2005 Market Street, Suite 2600 Philadelphia, PA 19103-7018 |
Counsel to the Independent Trustees Goodwin Procter LLP 901 New York Avenue, N.W. Washington, D.C. 20001 |
Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
Invesco V.I. S&P 500 Index Fund
| ||||
Annual Report to Shareholders
|
December 31, 2017 | |||
| ||||
Invesco V.I. Small Cap Equity Fund |
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Funds semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The Funds Form N-Q filings are available on the SEC website, sec.gov. Copies of the Funds Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-07452 and 033-57340. The Funds most recent portfolio holdings, as filed on Form N-Q, have also been made available to insurance companies issuing variable annuity contracts and variable life insurance policies (variable products) that invest in the Fund. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/ proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
This report must be accompanied or preceded by a currently effective Fund prospectus and variable product prospectus, which contain more complete information, including sales charges and expenses. Investors should read each carefully before investing.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE | ||
Invesco Distributors, Inc. VISCE-AR-1 02072018 1108 |
Managements Discussion of Fund Performance
Invesco V.I. Small Cap Equity Fund
Invesco V.I. Small Cap Equity Fund
Your Funds Long-Term Performance
Results of a $10,000 Investment Oldest Share Class(es)
Fund and index data from 12/31/07
1 | Source: FactSet Research Systems Inc. |
2 | Source: Lipper Inc. |
Past performance cannot guarantee
comparable future results.
Invesco V.I. Small Cap Equity Fund
Invesco V.I. Small Cap Equity Funds investment objective is long-term growth of capital.
∎ | Unless otherwise stated, information presented in this report is as of December 31, 2017, and is based on total net assets. |
∎ | Unless otherwise noted, all data provided by Invesco. |
Invesco V.I. Small Cap Equity Fund
Schedule of Investments(a)
December 31, 2017
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Small Cap Equity Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Small Cap Equity Fund
Investment Abbreviations:
REIT | Real Estate Investment Trust |
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poors. |
(b) | All or a portion of this security was out on loan at December 31, 2017. |
(c) | Non-income producing security. |
(d) | The money market fund and the Fund are affiliated by having the same investment adviser. The rate shown is the 7-day SEC standardized yield as of December 31, 2017. |
(e) | The security has been segregated to satisfy the commitment to return the cash collateral received in securities lending transactions upon the borrowers return of the securities loaned. See Note 1I. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Small Cap Equity Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Small Cap Equity Fund
Statement of Changes in Net Assets
For the years ended December 31, 2017 and 2016
2017 | 2016 | |||||||
Operations: |
||||||||
Net investment income (loss) |
$ | (449,792 | ) | $ | (207,323 | ) | ||
Net realized gain |
19,070,078 | 13,816,268 | ||||||
Change in net unrealized appreciation |
20,825,514 | 20,760,134 | ||||||
Net increase in net assets resulting from operations |
39,445,800 | 34,369,079 | ||||||
Distributions to shareholders from net realized gains: |
||||||||
Series l |
(6,502,386 | ) | (11,226,305 | ) | ||||
Series ll |
(7,130,030 | ) | (10,517,748 | ) | ||||
Total distributions from net realized gains |
(13,632,416 | ) | (21,744,053 | ) | ||||
Share transactionsnet: |
||||||||
Series l |
(25,705,703 | ) | (11,957,409 | ) | ||||
Series ll |
(3,963,272 | ) | 14,920,964 | |||||
Net increase (decrease) in net assets resulting from share transactions |
(29,668,975 | ) | 2,963,555 | |||||
Net increase (decrease) in net assets |
(3,855,591 | ) | 15,588,581 | |||||
Net assets: |
||||||||
Beginning of year |
310,609,888 | 295,021,307 | ||||||
End of year (includes undistributed net investment income (loss) of $(76,130) and $(80,448), respectively) |
$ | 306,754,297 | $ | 310,609,888 |
Notes to Financial Statements
December 31, 2017
NOTE 1Significant Accounting Policies
Invesco V.I. Small Cap Equity Fund (the Fund) is a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Trust). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end series management investment company consisting of twenty-four separate portfolios, (each constituting a Fund). The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each Fund or class will be voted on exclusively by the shareholders of such Fund or class. Current Securities and Exchange Commission (SEC) guidance, however, requires participating insurance companies offering separate accounts to vote shares proportionally in accordance with the instructions of the contract owners whose investments are funded by shares of each Fund or class.
The Funds investment objective is long-term growth of capital.
The Fund currently offers two classes of shares, Series I and Series II, both of which are offered to insurance company separate accounts funding variable annuity contracts and variable life insurance policies (variable products).
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946, Financial Services Investment Companies.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations Securities, including restricted securities, are valued according to the following policy. |
A security listed or traded on an exchange (except convertible securities) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and asked prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and asked prices. For purposes of determining net asset value (NAV) per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (NYSE).
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end-of-day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
Debt obligations (including convertible securities) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual trading characteristics and other market data. Pricing services generally value debt obligations assuming orderly transactions of institutional round lot size, but a fund may hold or transact in the same securities in smaller, odd lot sizes. Odd lots often trade at lower prices than
Invesco V.I. Small Cap Equity Fund
institutional round lots. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Foreign securities (including foreign exchange contracts) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that the investment adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trusts officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/asked quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a securitys fair value.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuers assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
B. | Securities Transactions and Investment Income Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any) is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Funds net asset value and, accordingly, they reduce the Funds total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and the Statement of Changes in Net Assets, or the net investment income per share and the ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. | Country Determination For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuers securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
D. | Distributions Distributions from net investment income and net realized capital gain, if any, are generally declared and paid to separate accounts of participating insurance companies annually and recorded on the ex-dividend date. |
E. | Federal Income Taxes The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the Internal Revenue Code), necessary to qualify as a regulated investment company and to distribute substantially all of the Funds taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. |
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Funds uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
Invesco V.I. Small Cap Equity Fund
F. | Expenses Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
G. | Accounting Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
H. | Indemnifications Under the Trusts organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Funds servicing agreements, that contain a variety of indemnification clauses. The Funds maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
I. | Securities Lending The Fund may lend portfolio securities having a market value up to one-third of the Funds total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily by the securities lending provider. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its sponsored agencies. Cash collateral received in connection with these loans is invested in short-term money market instruments or affiliated money market funds and is shown as such on the Schedule of Investments. The Fund bears the risk of loss with respect to the investment of collateral. It is the Funds policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. When loaning securities, the Fund retains certain benefits of owning the securities, including the economic equivalent of dividends or interest generated by the security. Lending securities entails a risk of loss to the Fund if, and to the extent that, the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower failed to return the securities. The securities loaned are subject to termination at the option of the borrower or the Fund. Upon termination, the borrower will return to the Fund the securities loaned and the Fund will return the collateral. Upon the failure of the borrower to return the securities, collateral may be liquidated and the securities may be purchased on the open market to replace the loaned securities. The Fund could experience delays and costs in gaining access to the collateral and the securities may lose value during the delay which could result in potential losses to the Fund. Some of these losses may be indemnified by the lending agent. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to any loss on the collateral invested. Dividends received on cash collateral investments for securities lending transactions, which are net of compensation to counterparties, are included in Dividends from affiliated money market funds on the Statement of Operations. The aggregate value of securities out on loan, if any, is shown as a footnote on the Statement of Assets and Liabilities. |
NOTE 2Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the Adviser or Invesco). Under the terms of the investment advisory agreement, the Fund accrues daily and pays monthly an advisory fee to the Adviser based on the annual rate of the Funds average daily net assets as follows:
Average Daily Net Assets | Rate | |||||||
First $250 million |
0 | .745% | ||||||
Next $250 million |
0 | .73% | ||||||
Next $500 million |
0 | .715% | ||||||
Next $1.5 billion |
0 | .70% | ||||||
Next $2.5 billion |
0 | .685% | ||||||
Next $2.5 billion |
0 | .67% | ||||||
Next $2.5 billion |
0 | .655% | ||||||
Over $10 billion |
0 | .64% |
For the year ended December 31, 2017, the effective advisory fees incurred by the Fund was 0.74%.
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. and separate sub-advisory agreements with Invesco PowerShares Capital Management LLC and Invesco Asset Management (India) Private Limited (collectively, the Affiliated Sub-Advisers) the Adviser, not the Fund, will pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2018, to waive advisory fees and/or reimburse expenses to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Series I shares to 2.00% and Series II shares to 2.25% of average daily net assets (the expense limits). In determining the Advisers obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on June 30, 2018. During its term, the fee waiver agreement cannot be terminated or amended to increase expense limits or reduce the advisory fee waiver without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
Invesco V.I. Small Cap Equity Fund
Further, the Adviser has contractually agreed, through at least June 30, 2019, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash (excluding investments of cash collateral from securities lending) in such affiliated money market funds.
For the year ended December 31, 2017, the Adviser waived advisory fees of $5,324.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco a fee for costs incurred in providing accounting services and fund administrative services to the Fund and to reimburse Invesco for fees paid to insurance companies that have agreed to provide certain administrative services to the Fund. These administrative services provided by the insurance companies may include, among other things: maintenance of master accounts with the Fund; tracking, recording and transmitting net purchase and redemption orders for Fund shares; maintaining and preserving records related to the purchase, redemption and other account activity of variable product owners; distributing copies of Fund documents such as prospectuses, proxy materials and periodic reports, to variable product owners, and responding to inquiries from variable product owners about the Fund. Pursuant to such agreement, for the year ended December 31, 2017, Invesco was paid $74,920 for accounting and fund administrative services and was reimbursed $449,892 for fees paid to insurance companies.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (IIS) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. For the year ended December 31, 2017, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
The Trust has entered into a master distribution agreement with Invesco Distributors, Inc. (IDI) to serve as the distributor for the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Funds Series II shares (the Plan). The Fund, pursuant to the Plan, pays IDI compensation at the annual rate of 0.25% of the Funds average daily net assets of Series II shares. The fees are accrued daily and paid monthly. Of the Plan payments, up to 0.25% of the average daily net assets of the Series II shares may be paid to insurance companies who furnish continuing personal shareholder services to customers who purchase and own Series II shares of the Fund. For the year ended December 31, 2017, expenses incurred under the Plan are detailed in the Statement of Operations as Distribution fees.
For the year ended December 31, 2017, the Fund incurred $2,972 in brokerage commissions with Invesco Capital Markets, Inc., an affiliate of the Adviser and IDI, for portfolio transactions executed on behalf of the Fund.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
NOTE 3Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investments assigned level:
Level 1 | Prices are determined using quoted prices in an active market for identical assets. |
Level 2 | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Level 3 | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Funds own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
As of December 31, 2017, all of the securities in this Fund were valued based on Level 1 inputs (see the Schedule of Investments for security categories). The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
The Funds policy is to recognize transfers in and out of the valuation levels as of the end of the reporting period. During the year ended December 31, 2017, there were no material transfers between valuation levels.
NOTE 4Security Transactions with Affiliated Funds
The Fund is permitted to purchase or sell securities from or to certain other Invesco Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment adviser (or affiliated investment advisers), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, for the year ended December 31, 2017, the Fund engaged in securities sales of $6,563,385, which resulted in net realized gains of $1,043,508.
Invesco V.I. Small Cap Equity Fund
NOTE 5Trustees and Officers Fees and Benefits
Trustees and Officers Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees and Officers Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees were eligible to participate in a retirement plan that provided for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees and Officers Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 6Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period-end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
NOTE 7Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended December 31, 2017 and 2016:
2017 | 2016 | |||||||
Ordinary income |
$ | | $ | 1,089,693 | ||||
Long-term capital gain |
13,632,416 | 20,654,360 | ||||||
Total distributions |
$ | 13,632,416 | $ | 21,744,053 |
Tax Components of Net Assets at Period-End:
2017 | ||||
Undistributed ordinary income |
$ | 4,133,141 | ||
Undistributed long-term gain |
14,349,764 | |||
Net unrealized appreciation investments |
77,428,946 | |||
Temporary book/tax differences |
(76,130 | ) | ||
Shares of beneficial interest |
210,918,576 | |||
Total net assets |
$ | 306,754,297 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Funds net unrealized appreciation difference is attributable primarily to wash sales.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Funds temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund does not have a capital loss carryforward as of December 31, 2017.
Invesco V.I. Small Cap Equity Fund
NOTE 8Investment Transactions
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended December 31, 2017 was $60,283,932 and $103,165,378, respectively. Cost of investments, including any derivatives, on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investments on a Tax Basis | ||||
Aggregate unrealized appreciation of investments |
$ | 86,915,479 | ||
Aggregate unrealized (depreciation) of investments |
(9,486,533 | ) | ||
Net unrealized appreciation of investments |
$ | 77,428,946 | ||
Cost of investments for tax purposes is $232,726,011. |
NOTE 9Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of net operating losses, on December 31, 2017, undistributed net investment income (loss) was increased by $454,110 and undistributed net realized gain was decreased by $454,110. This reclassification had no effect on the net assets of the Fund.
NOTE 10Share Information
Summary of Share Activity | ||||||||||||||||
Years ended December 31, | ||||||||||||||||
2017(a) | 2016 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: |
||||||||||||||||
Series I |
746,673 | $ | 14,287,755 | 1,273,851 | $ | 21,861,494 | ||||||||||
Series II |
553,660 | 10,143,965 | 1,640,615 | 27,600,516 | ||||||||||||
Issued as reinvestment of dividends: |
||||||||||||||||
Series I |
346,979 | 6,502,386 | 639,312 | 11,226,305 | ||||||||||||
Series II |
399,666 | 7,130,030 | 626,056 | 10,517,748 | ||||||||||||
Reacquired: |
||||||||||||||||
Series I |
(2,427,148 | ) | (46,495,844 | ) | (2,550,489 | ) | (45,045,208 | ) | ||||||||
Series II |
(1,162,843 | ) | (21,237,267 | ) | (1,379,733 | ) | (23,197,300 | ) | ||||||||
Net increase (decrease) in share activity |
(1,543,013 | ) | $ | (29,668,975 | ) | 249,612 | $ | 2,963,555 |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 68% of the outstanding shares of the Fund. The Fund and the Funds principal underwriter or adviser, are parties to participation agreements with these entities whereby these entities sell units of interest in separate accounts funding variable products that are invested in the Fund. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
Invesco V.I. Small Cap Equity Fund
NOTE 11Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Net asset value, beginning of period |
Net investment income (loss)(a) |
Net gains (losses) on securities (both realized and unrealized) |
Total from investment operations |
Dividends from net investment income |
Distributions from net realized gains |
Total distributions |
Net asset value, end of period |
Total return(b) |
Net assets, end of period (000s omitted) |
Ratio of net assets |
Ratio of expenses to average net assets without fee waivers and/or expenses absorbed |
Ratio of net investment income (loss) to average net assets |
Portfolio turnover(c) |
|||||||||||||||||||||||||||||||||||||||||||
Series I |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/17 |
$ | 18.38 | $ | (0.01 | ) | $ | 2.53 | $ | 2.52 | $ | | $ | (0.88 | ) | $ | (0.88 | ) | $ | 20.02 | 14.06 | % | $ | 149,405 | 0.97 | %(d) | 0.97 | %(d) | (0.02 | )%(d) | 20 | % | |||||||||||||||||||||||||
Year ended 12/31/16 |
17.64 | 0.01 | 2.06 | 2.07 | | (1.33 | ) | (1.33 | ) | 18.38 | 12.06 | 161,727 | 1.01 | 1.01 | 0.04 | 37 | ||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 |
23.64 | 0.00 | (1.27 | ) | (1.27 | ) | | (4.73 | ) | (4.73 | ) | 17.64 | (5.52 | ) | 166,407 | 1.04 | 1.04 | 0.02 | 31 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 |
25.44 | (0.04 | ) | 0.47 | 0.43 | | (2.23 | ) | (2.23 | ) | 23.64 | 2.36 | 203,963 | 1.05 | 1.05 | (0.17 | ) | 45 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 |
18.69 | (0.04 | ) | 7.02 | 6.98 | (0.00 | ) | (0.23 | ) | (0.23 | ) | 25.44 | 37.47 | 262,261 | 1.05 | 1.05 | (0.17 | ) | 35 | |||||||||||||||||||||||||||||||||||||
Series II |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/17 |
17.58 | (0.05 | ) | 2.40 | 2.35 | | (0.88 | ) | (0.88 | ) | 19.05 | 13.73 | 157,349 | 1.22 | (d) | 1.22 | (d) | (0.27 | )(d) | 20 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/16 |
16.96 | (0.03 | ) | 1.98 | 1.95 | | (1.33 | ) | (1.33 | ) | 17.58 | 11.84 | 148,883 | 1.26 | 1.26 | (0.21 | ) | 37 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 |
22.97 | (0.05 | ) | (1.23 | ) | (1.28 | ) | | (4.73 | ) | (4.73 | ) | 16.96 | (5.74 | ) | 128,614 | 1.29 | 1.29 | (0.23 | ) | 31 | |||||||||||||||||||||||||||||||||||
Year ended 12/31/14 |
24.85 | (0.10 | ) | 0.45 | 0.35 | | (2.23 | ) | (2.23 | ) | 22.97 | 2.08 | 145,505 | 1.30 | 1.30 | (0.42 | ) | 45 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 |
18.31 | (0.09 | ) | 6.86 | 6.77 | | (0.23 | ) | (0.23 | ) | 24.85 | 37.08 | 134,526 | 1.30 | 1.30 | (0.42 | ) | 35 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year, if applicable, and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns. |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. |
(d) | Ratios are based on average daily net assets (000s omitted) of $153,601 and $150,399 for Series I and Series II shares, respectively. |
Invesco V.I. Small Cap Equity Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) and Shareholders of Invesco V.I. Small Cap Equity Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Invesco V.I. Small Cap Equity Fund (one of the funds constituting AIM Variable Insurance Funds (Invesco Variable Insurance Funds), hereafter referred to as the Fund) as of December 31, 2017, the related statement of operations for the year ended December 31, 2017, the statement of changes in net assets for each of the two years in the period ended December 31, 2017, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2017 (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2017 and the financial highlights for each of the five years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Funds management. Our responsibility is to express an opinion on the Funds financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2017 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, TX
February 14, 2018
We have served as the auditor of one or more of the investment companies in the Invesco/PowerShares group of investment companies since at least 1995. We have not determined the specific year we began serving as auditor.
Invesco V.I. Small Cap Equity Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period July 1, 2017 through December 31, 2017.
The actual and hypothetical expenses in the examples below do not represent the effect of any fees or other expenses assessed in connection with a variable product; if they did, the expenses shown would be higher while the ending account values shown would be lower.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled Actual Expenses Paid During Period to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Funds actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs. Therefore, the hypothetical information is useful in comparing ongoing costs, and will not help you determine the relative total costs of owning different funds.
Class | Beginning Account Value (07/01/17) |
ACTUAL | HYPOTHETICAL (5% annual return before expenses) |
Annualized Ratio |
||||||||||||||||||||
Ending Account Value (12/31/17)1 |
Expenses Paid During Period2 |
Ending Account Value (12/31/17) |
Expenses Paid During Period2 |
|||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 1,085.60 | $ | 5.05 | $ | 1,020.37 | $ | 4.89 | 0.96 | % | ||||||||||||
Series II | 1,000.00 | 1,084.20 | 6.36 | 1,019.11 | 6.16 | 1.21 |
1 | The actual ending account value is based on the actual total return of the Fund for the period July 1, 2017 through December 31, 2017, after actual expenses and will differ from the hypothetical ending account value which is based on the Funds expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Funds annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half year. |
Invesco V.I. Small Cap Equity Fund
Tax Information
Form 1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific states requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended December 31, 2017:
Federal and State Income Tax |
||||
Long-Term Capital Gain Distributions |
$ | 13,632,416 | ||
Corporate Dividends Received Deduction* |
0 | % | ||
U.S. Treasury Obligations* |
0 | % |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Funds fiscal year. |
Invesco V.I. Small Cap Equity Fund
Trustees and Officers
The address of each trustee and officer is AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Trust), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trusts organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 1960 Trustee |
2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business
Formerly: Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US), Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) |
158 | None | ||||
Philip A. Taylor2 1954 Trustee and Senior Vice President |
2006 | Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco Aim Management Group, Inc.) (financial services holding company); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.) (registered transfer agent); Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company); Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management).
Formerly: Co-Chairman, Co-President and Co-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chief Executive Officer and President, Van Kampen Exchange Corp; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurers Series Trust (Invesco Treasurers Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurers Series Trust (Invesco Treasurers Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) (registered broker dealer); Manager, Invesco PowerShares Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco Aim Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurers Series Trust (Invesco Treasurers Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. |
158 | None |
1 | Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser. |
2 | Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser. |
Invesco V.I. Small Cap Equity Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Independent Trustees | ||||||||
Bruce L. Crockett 1944 Trustee and Chair |
1993 | Chairman, Crockett Technologies Associates (technology consulting company)
Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute: Member of the Audit Committee, Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council |
158 | Director and Chairman of the Audit Committee, ALPS (Attorneys Liability Protection Society) (insurance company); Director and Member of the Audit Committee and Compensation Committee, Ferroglobe PLC (metallurgical company) | ||||
David C. Arch 1945 Trustee |
2010 | Chairman of Blistex Inc. (consumer health care products manufacturer); Member, World Presidents Organization | 158 | Board member of the Illinois Manufacturers Association | ||||
Jack M. Fields 1952 Trustee |
1997 | Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Chairman, Discovery Learning Alliance (non-profit)
Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff) (human resources provider); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives |
158 | None | ||||
Cynthia Hostetler 1962 Trustee |
2017 | Non-Executive Director and Trustee of a number of public and private business corporations
Formerly: Head of Investment Funds and Private Equity, Overseas Private Investment Corporation; President, First Manhattan Bancorporation, Inc.; Attorney, Simpson Thacher & Bartlett LLP |
158 | Vulcan Materials Company (construction materials company); Trilinc Global Impact Fund; Aberdeen Investment Funds (4 portfolios); Artio Global Investment LLC (mutual fund complex); Edgen Group, Inc. (specialized energy and infrastructure products distributor) | ||||
Eli Jones 1961 Trustee |
2016 | Professor and Dean, Mays Business School Texas A&M University
Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University; Director, Arvest Bank |
158 | Insperity, Inc. (formerly known as Administaff) (human resources provider) | ||||
Prema Mathai-Davis 1950 Trustee |
1998 | Retired. | 158 | None | ||||
Teresa M. Ressel 1962 Trustee |
2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Chief Financial Officer, Olayan America, The Olayan Group (international investor/commercial/industrial); Chief Executive Officer, UBS Securities LLC; Group Chief Operating Officer, Americas, UBS AG; Assistant Secretary for Management & Budget and CFO, US Department of the Treasury |
158 | Atlantic Power Corporation (power generation company); ON Semiconductor Corp. (semiconductor supplier) | ||||
Ann Barnett Stern 1957 Trustee |
2017 | President and Chief Executive Officer, Houston Endowment Inc. (private philanthropic institution)
Formerly: Executive Vice President and General Counsel, Texas Childrens Hospital; Attorney, Beck, Redden and Secrest, LLP; Business Law Instructor, University of St. Thomas; Attorney, Andrews & Kurth LLP |
158 | Federal Reserve Bank of Dallas | ||||
Raymond Stickel, Jr. 1944 Trustee |
2005 | Retired.
Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios); Partner, Deloitte & Touche |
158 | None | ||||
Robert C. Troccoli 1949 Trustee |
2016 | Adjunct Professor, University of Denver Daniels College of Business
Formerly: Senior Partner, KPMG LLP |
158 | None | ||||
Christopher L. Wilson 1957 Trustee |
2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Managing Partner, CT2, LLC (investing and consulting firm); President/Chief Executive Officer, Columbia Funds, Bank of America Corporation; President/Chief Executive Officer, CDC IXIS Asset Management Services, Inc.; Principal & Director of Operations, Scudder Funds, Scudder, Stevens & Clark, Inc.; Assistant Vice President, Fidelity Investments |
158 | TD Asset Management USA Inc. (mutual fund complex) (22 portfolios); ISO New England, Inc. (non-profit organization managing regional electricity market) |
Invesco V.I. Small Cap Equity Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers | ||||||||
Sheri Morris 1964 President, Principal Executive Officer and Treasurer |
1999 | President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco Aim Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; and Treasurer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust and PowerShares Actively Managed Exchange-Traded Fund Trust |
N/A | N/A | ||||
Russell C. Burk 1958 Senior Vice President and Senior Officer |
2005 | Senior Vice President and Senior Officer, The Invesco Funds | N/A | N/A | ||||
John M. Zerr 1962 Senior Vice President, Chief Legal Officer and Secretary |
2006 | Director, Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Managing Director, Invesco PowerShares Capital Management LLC; Director, Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust; Manager and Secretary, Invesco Indexing LLC
Formerly: Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser); Vice President and Secretary, PBHG Funds (an investment company) and PBHG Insurance Series Fund (an investment company); Chief Operating Officer, General Counsel and Secretary, Old Mutual Investment Partners (a broker-dealer); General Counsel and Secretary, Old Mutual Fund Services (an administrator) and Old Mutual Shareholder Services (a shareholder servicing center); Executive Vice President, General Counsel and Secretary, Old Mutual Capital, Inc. (an investment adviser); and Vice President and Secretary, Old Mutual Advisors Funds (an investment company) |
N/A | N/A | ||||
Gregory G. McGreevey 1962 Senior Vice President |
2012 | Senior Managing Director, Invesco Ltd.; Director, Chairman, President, and Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President, Invesco Management Group, Inc.; Director, Invesco Mortgage Capital, Inc. and Invesco Senior Secured Management, Inc.; and Senior Vice President, The Invesco Funds
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A | ||||
Kelli Gallegos 1970 Vice President, Principal Financial Officer and Assistant Treasurer |
2008 | Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A |
Invesco V.I. Small Cap Equity Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers(continued) | ||||||||
Tracy Sullivan 1962 Vice President, Chief Tax Officer and Assistant Treasurer |
2008 | Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A | ||||
Crissie M. Wisdom 1969 Anti-Money Laundering Compliance Officer |
2013 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., Invesco Management Group, Inc., The Invesco Funds, and PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp. |
N/A | N/A | ||||
Robert R. Leveille 1969 Chief Compliance Officer |
2016 | Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds
Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds |
N/A | N/A |
The Statement of Additional Information of the Trust includes additional information about the Funds Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Funds Statement of Additional Information for information on the Funds sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 |
Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Auditors PricewaterhouseCoopers LLP 1000 Louisiana Street, Suite 5800 Houston, TX 77002-5678 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2005 Market Street, Suite 2600 Philadelphia, PA 19103-7018 |
Counsel to the Independent Trustees Goodwin Procter LLP 901 New York Avenue, N.W. Washington, D.C. 20001 |
Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
Invesco V.I. Small Cap Equity Fund
| ||||
Annual Report to Shareholders
|
December 31, 2017 | |||
| ||||
Invesco V.I. Technology Fund
|
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Funds semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The Funds Form N-Q filings are available on the SEC website, sec.gov. Copies of the Funds Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-07452 and 033-57340. The Funds most recent portfolio holdings, as filed on Form N-Q, have also been made available to insurance companies issuing variable annuity contracts and variable life insurance policies (variable products) that invest in the Fund. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/ proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
This report must be accompanied or preceded by a currently effective Fund prospectus and variable product prospectus, which contain more complete information, including sales charges and expenses. Investors should read each carefully before investing.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE | ||
Invesco Distributors, Inc. I-VITEC-AR-1 02072018 1548 |
Managements Discussion of Fund Performance
Invesco V.I. Technology Fund
Invesco V.I. Technology Fund
Your Funds Long-Term Performance
Results of a $10,000 Investment Oldest Share Class(es)
Fund and index data from 12/31/07
1 | Source: FactSet Research Systems Inc. |
2 | Source: Lipper Inc. |
Past performance cannot guarantee
comparable future results.
Invesco V.I. Technology Fund
Invesco V.I. Technology Funds investment objective is long-term growth of capital.
∎ | Unless otherwise stated, information presented in this report is as of December 31, 2017, and is based on total net assets. |
∎ | Unless otherwise noted, all data provided by Invesco. |
Invesco V.I. Technology Fund
Invesco V.I. Technology Fund
Schedule of Investments(a)
December 31, 2017
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Technology Fund
Investment Abbreviations:
ADR | American Depositary Receipt |
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poors. |
(b) | Non-income producing security. |
(c) | All or a portion of this security was out on loan at December 31, 2017. |
(d) | The money market fund and the Fund are affiliated by having the same investment adviser. The rate shown is the 7-day SEC standardized yield as of December 31, 2017. |
(e) | The security has been segregated to satisfy the commitment to return the cash collateral received in securities lending transactions upon the borrowers return of the securities loaned. See Note 1I. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Technology Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Technology Fund
Statement of Changes in Net Assets
For the years ended December 31, 2017 and 2016
2017 | 2016 | |||||||
Operations: |
||||||||
Net investment income (loss) |
$ | (496,234 | ) | $ | (347,526 | ) | ||
Net realized gain |
6,458,329 | 5,928,606 | ||||||
Change in net unrealized appreciation (depreciation) |
26,955,776 | (7,410,264 | ) | |||||
Net increase (decrease) in net assets resulting from operations |
32,917,871 | (1,829,184 | ) | |||||
Distributions to shareholders from net realized gains: |
||||||||
Series l |
(5,644,440 | ) | (4,059,433 | ) | ||||
Series ll |
(458,282 | ) | (343,483 | ) | ||||
Total distributions from net realized gains |
(6,102,722 | ) | (4,402,916 | ) | ||||
Share transactionsnet: |
||||||||
Series l |
814,302 | (13,847,236 | ) | |||||
Series ll |
729,904 | (789,246 | ) | |||||
Net increase (decrease) in net assets resulting from share transactions |
1,544,206 | (14,636,482 | ) | |||||
Net increase (decrease) in net assets |
28,359,355 | (20,868,582 | ) | |||||
Net assets: |
||||||||
Beginning of year |
94,431,454 | 115,300,036 | ||||||
End of year (includes undistributed net investment income (loss) of $(63,172) and $(67,249), respectively) |
$ | 122,790,809 | $ | 94,431,454 |
Notes to Financial Statements
December 31, 2017
NOTE 1Significant Accounting Policies
Invesco V.I. Technology Fund (the Fund) is a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Trust). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end series management investment company consisting of twenty-four separate portfolios, (each constituting a Fund). The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each Fund or class will be voted on exclusively by the shareholders of such Fund or class. Current Securities and Exchange Commission (SEC) guidance, however, requires participating insurance companies offering separate accounts to vote shares proportionally in accordance with the instructions of the contract owners whose investments are funded by shares of each Fund or class.
The Funds investment objective is long-term growth of capital.
The Fund currently offers two classes of shares, Series I and Series II, both of which are offered to insurance company separate accounts funding variable annuity contracts and variable life insurance policies (variable products).
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946, Financial Services Investment Companies.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations Securities, including restricted securities, are valued according to the following policy. |
A security listed or traded on an exchange (except convertible securities) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and asked prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and asked prices. For purposes of determining net asset value (NAV) per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (NYSE).
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end-of-day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
Debt obligations (including convertible securities) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual trading characteristics and other market data. Pricing services generally value debt obligations assuming orderly transactions of institutional
Invesco V.I. Technology Fund
round lot size, but a fund may hold or transact in the same securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Foreign securities (including foreign exchange contracts) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that the investment adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trusts officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/asked quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a securitys fair value.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuers assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
B. | Securities Transactions and Investment Income Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any) is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Funds net asset value and, accordingly, they reduce the Funds total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and the Statement of Changes in Net Assets, or the net investment income per share and the ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. | Country Determination For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuers securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
D. | Distributions Distributions from net investment income and net realized capital gain, if any, are generally declared and paid to separate accounts of participating insurance companies annually and recorded on the ex-dividend date. |
E. | Federal Income Taxes The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the Internal Revenue Code), necessary to qualify as a regulated investment company and to distribute substantially all of the Funds taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. |
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Funds uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
Invesco V.I. Technology Fund
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
F. | Expenses Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
G. | Accounting Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
H. | Indemnifications Under the Trusts organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Funds servicing agreements, that contain a variety of indemnification clauses. The Funds maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
I. | Securities Lending The Fund may lend portfolio securities having a market value up to one-third of the Funds total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily by the securities lending provider. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its sponsored agencies. Cash collateral received in connection with these loans is invested in short-term money market instruments or affiliated money market funds and is shown as such on the Schedule of Investments. The Fund bears the risk of loss with respect to the investment of collateral. It is the Funds policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. When loaning securities, the Fund retains certain benefits of owning the securities, including the economic equivalent of dividends or interest generated by the security. Lending securities entails a risk of loss to the Fund if, and to the extent that, the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower failed to return the securities. The securities loaned are subject to termination at the option of the borrower or the Fund. Upon termination, the borrower will return to the Fund the securities loaned and the Fund will return the collateral. Upon the failure of the borrower to return the securities, collateral may be liquidated and the securities may be purchased on the open market to replace the loaned securities. The Fund could experience delays and costs in gaining access to the collateral and the securities may lose value during the delay which could result in potential losses to the Fund. Some of these losses may be indemnified by the lending agent. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to any loss on the collateral invested. Dividends received on cash collateral investments for securities lending transactions, which are net of compensation to counterparties, are included in Dividends from affiliated money market funds on the Statement of Operations. The aggregate value of securities out on loan, if any, is shown as a footnote on the Statement of Assets and Liabilities. |
J. | Foreign Currency Translations Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Funds books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. |
The Fund may invest in foreign securities, which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests and are shown in the Statement of Operations.
K. | Forward Foreign Currency Contracts The Fund may engage in foreign currency transactions either on a spot (i.e. for prompt delivery and settlement) basis, or through forward foreign currency contracts, to manage or minimize currency or exchange rate risk. |
The Fund may also enter into forward foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to lock in the U.S. dollar price of that security, or the Fund may also enter into forward foreign currency contracts that do not provide for physical settlement of the two currencies, but instead are settled by a single cash payment calculated as the difference between the agreed upon exchange rate and the spot rate at settlement based upon an agreed upon notional amount (non-deliverable forwards). The Fund will set aside liquid assets in an amount equal to the daily mark-to-market obligation for forward foreign currency contracts.
A forward foreign currency contract is an obligation between two parties (Counterparties) to purchase or sell a specific currency for an agreed-upon price at a future date. The use of forward foreign currency contracts does not eliminate fluctuations in the price of the underlying securities the Fund owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statement of Operations. The primary risks associated with forward foreign currency contracts include failure of the Counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities.
Invesco V.I. Technology Fund
L. | Other Risks The Funds investments are concentrated in a comparatively narrow segment of the economy, which may make the Fund more volatile. |
Many products and services offered in technology-related industries are subject to rapid obsolescence, which may lower the value of the issuers in this sector.
NOTE 2Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the Adviser or Invesco). Under the terms of the investment advisory agreement, the Fund accrues daily and pays monthly an advisory fee to the Adviser based on the annual rate of the Funds average daily net assets as follows:
Average Daily Net Assets | Rate | |||
First $250 million |
0.75% | |||
Next $250 million |
0.74% | |||
Next $500 million |
0.73% | |||
Next $1.5 billion |
0.72% | |||
Next $2.5 billion |
0.71% | |||
Next $2.5 billion |
0.70% | |||
Next $2.5 billion |
0.69% | |||
Over $10 billion |
0.68% |
For the year ended December 31, 2017, the effective advisory fees incurred by the Fund was 0.75%.
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. and separate sub-advisory agreements with Invesco PowerShares Capital Management LLC and Invesco Asset Management (India) Private Limited (collectively, the Affiliated Sub-Advisers) the Adviser, not the Fund, will pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2018, to waive advisory fees and/or reimburse expenses to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Series I shares to 2.00% and Series II shares to 2.25% of average daily net assets (the expense limits). In determining the Advisers obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on June 30, 2018. During its term, the fee waiver agreement cannot be terminated or amended to increase expense limits or reduce the advisory fee waiver without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
Further, the Adviser has contractually agreed, through at least June 30, 2019, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash in such affiliated money market funds.
For the year ended December 31, 2017, the Adviser waived advisory fees of $1,311.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco a fee for costs incurred in providing accounting services and fund administrative services to the Fund and to reimburse Invesco for fees paid to insurance companies that have agreed to provide certain administrative services to the Fund. These administrative services provided by the insurance companies may include, among other things: maintenance of master accounts with the Fund; tracking, recording and transmitting net purchase and redemption orders for Fund shares; maintaining and preserving records related to the purchase, redemption and other account activity of variable product owners; distributing copies of Fund documents such as prospectuses, proxy materials and periodic reports, to variable product owners, and responding to inquiries from variable product owners about the Fund. Pursuant to such agreement, for the year ended December 31, 2017, Invesco was paid $50,000 for accounting and fund administrative services and was reimbursed $170,760 for fees paid to insurance companies.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (IIS) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. For the year ended December 31, 2017, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
The Trust has entered into a master distribution agreement with Invesco Distributors, Inc. (IDI) to serve as the distributor for the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Funds Series II shares (the Plan). The Fund, pursuant to the Plan, pays IDI compensation at the annual rate of 0.25% of the Funds average daily net assets of Series II shares. The fees are accrued daily and paid monthly. Of the Plan payments, up to 0.25% of the average daily net assets of the Series II shares may be paid to insurance companies who furnish continuing personal shareholder services to customers who purchase and own Series II shares of the Fund. For the year ended December 31, 2017, expenses incurred under the Plan are detailed in the Statement of Operations as Distribution fees.
For the year ended December 31, 2017, the Fund incurred $1,845 in brokerage commissions with Invesco Capital Markets, Inc., an affiliate of the Adviser and IDI, for portfolio transactions executed on behalf of the Fund.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
Invesco V.I. Technology Fund
NOTE 3Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investments assigned level:
Level 1 | Prices are determined using quoted prices in an active market for identical assets. |
Level 2 | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Level 3 | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Funds own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
The following is a summary of the tiered valuation input levels, as of December 31, 2017. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
The Funds policy is to recognize transfers in and out of the valuation levels as of the end of the reporting period. During the year ended December 31, 2017, there were no material transfers between valuation levels.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Investments in Securities |
||||||||||||||||
Common Stocks & Other Equity Interests |
$ | 112,964,383 | $ | 8,962,095 | $ | | $ | 121,926,478 | ||||||||
Money Market Funds |
1,997,297 | | | 1,997,297 | ||||||||||||
Total Investments |
$ | 114,961,680 | $ | 8,962,095 | $ | | $ | 123,923,775 |
NOTE 4Security Transactions with Affiliated Funds
The Fund is permitted to purchase or sell securities from or to certain other Invesco Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment adviser (or affiliated investment advisers), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, for the year ended December 31, 2017, the Fund engaged in securities sales of $605,398, which resulted in net realized gains of $76,004.
NOTE 5Trustees and Officers Fees and Benefits
Trustees and Officers Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees and Officers Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees were eligible to participate in a retirement plan that provided for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees and Officers Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 6Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period-end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
Invesco V.I. Technology Fund
NOTE 7Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended December 31, 2017 and 2016:
2017 | 2016 | |||||||
Long-term capital gain |
$ | 6,102,722 | $ | 4,402,916 |
Tax Components of Net Assets at Period-End:
2017 | ||||
Undistributed ordinary income |
$ | 1,229,123 | ||
Undistributed long-term gain |
4,599,196 | |||
Net unrealized appreciation investments |
54,664,114 | |||
Temporary book/tax differences |
(63,172 | ) | ||
Shares of beneficial interest |
62,361,548 | |||
Total net assets |
$ | 122,790,809 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Funds net unrealized appreciation difference is attributable primarily to wash sales.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Funds temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund does not have a capital loss carryforward as of December 31, 2017.
NOTE 8Investment Transactions
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended December 31, 2017 was $48,958,039 and $54,613,591, respectively. Cost of investments, including any derivatives, on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investments on a Tax Basis | ||||
Aggregate unrealized appreciation of investments |
$ | 55,232,435 | ||
Aggregate unrealized (depreciation) of investments |
(568,321 | ) | ||
Net unrealized appreciation of investments |
$ | 54,664,114 |
Cost of investments for tax purposes is $69,259,661.
NOTE 9Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of net operating losses, on December 31, 2017, undistributed net investment income (loss) was increased by $500,311 and undistributed net realized gain was decreased by $500,311. This reclassification had no effect on the net assets of the Fund.
Invesco V.I. Technology Fund
NOTE 10Share Information
Summary of Share Activity | ||||||||||||||||
Years ended December 31, | ||||||||||||||||
2017(a) | 2016 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: |
||||||||||||||||
Series I |
997,886 | $ | 21,692,361 | 459,692 | $ | 7,989,025 | ||||||||||
Series II |
66,105 | 1,382,819 | 28,944 | 482,623 | ||||||||||||
Issued as reinvestment of dividends: |
||||||||||||||||
Series I |
253,797 | 5,644,440 | 220,142 | 4,059,433 | ||||||||||||
Series II |
21,607 | 458,282 | 19,439 | 343,483 | ||||||||||||
Reacquired: |
||||||||||||||||
Series I |
(1,214,728 | ) | (26,522,499 | ) | (1,477,788 | ) | (25,895,694 | ) | ||||||||
Series II |
(53,315 | ) | (1,111,197 | ) | (95,643 | ) | (1,615,352 | ) | ||||||||
Net increase (decrease) in share activity |
71,352 | $ | 1,544,206 | (845,214 | ) | $ | (14,636,482 | ) |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 60% of the outstanding shares of the Fund. The Fund and the Funds principal underwriter or adviser, are parties to participation agreements with these entities whereby these entities sell units of interest in separate accounts funding variable products that are invested in the Fund. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
NOTE 11Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Net asset value, beginning |
Net investment income |
Net gains (losses) on securities (both realized and unrealized) |
Total from investment operations |
Distributions from net |
Net asset of period |
Total return(b) |
Net assets, (000s omitted) |
Ratio of expenses to average net assets and/or expenses absorbed |
Ratio of expenses to average net absorbed |
Ratio of net investment to average net assets |
Portfolio turnover(c) |
|||||||||||||||||||||||||||||||||||||
Series I |
||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/17 |
$ | 17.89 | $ | (0.09 | ) | $ | 6.34 | $ | 6.25 | $ | (1.17 | ) | $ | 22.97 | 35.13 | % | $ | 113,352 | 1.06 | %(d) | 1.06 | %(d) | (0.41 | )%(d) | 43 | % | ||||||||||||||||||||||
Year ended 12/31/16 |
18.83 | (0.06 | ) | (0.06 | ) | (0.12 | ) | (0.82 | ) | 17.89 | (0.76 | ) | 87,632 | 1.10 | 1.10 | (0.33 | ) | 52 | ||||||||||||||||||||||||||||||
Year ended 12/31/15 |
19.75 | (0.11 | ) | 1.29 | 1.18 | (2.10 | ) | 18.83 | 6.82 | 107,257 | 1.15 | 1.15 | (0.53 | ) | 61 | |||||||||||||||||||||||||||||||||
Year ended 12/31/14 |
19.42 | (0.13 | ) | 2.20 | 2.07 | (1.74 | ) | 19.75 | 11.05 | 104,556 | 1.16 | 1.16 | (0.65 | ) | 77 | |||||||||||||||||||||||||||||||||
Year ended 12/31/13 |
16.87 | (0.07 | ) | 4.19 | 4.12 | (1.57 | ) | 19.42 | 25.14 | 103,151 | 1.17 | 1.17 | (0.40 | ) | 45 | |||||||||||||||||||||||||||||||||
Series II |
||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/17 |
17.14 | (0.14 | ) | 6.06 | 5.92 | (1.17 | ) | 21.89 | 34.74 | 9,439 | 1.31 | (d) | 1.31 | (d) | (0.66 | )(d) | 43 | |||||||||||||||||||||||||||||||
Year ended 12/31/16 |
18.12 | (0.10 | ) | (0.06 | ) | (0.16 | ) | (0.82 | ) | 17.14 | (1.01 | ) | 6,799 | 1.35 | 1.35 | (0.58 | ) | 52 | ||||||||||||||||||||||||||||||
Year ended 12/31/15 |
19.13 | (0.15 | ) | 1.24 | 1.09 | (2.10 | ) | 18.12 | 6.56 | 8,043 | 1.40 | 1.40 | (0.78 | ) | 61 | |||||||||||||||||||||||||||||||||
Year ended 12/31/14 |
18.90 | (0.17 | ) | 2.14 | 1.97 | (1.74 | ) | 19.13 | 10.82 | 4,775 | 1.41 | 1.41 | (0.90 | ) | 77 | |||||||||||||||||||||||||||||||||
Year ended 12/31/13 |
16.50 | (0.12 | ) | 4.09 | 3.97 | (1.57 | ) | 18.90 | 24.79 | 3,200 | 1.42 | 1.42 | (0.65 | ) | 45 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year, if applicable, and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns. |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. |
(d) | Ratios are based on average daily net assets (000s omitted) of $106,555 and $8,397 for Series I and Series II shares, respectively. |
Invesco V.I. Technology Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Variable Insurance Funds
(Invesco Variable Insurance Funds) and Shareholders of Invesco V.I. Technology Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Invesco V.I. Technology Fund (one of the funds constituting AIM Variable Insurance Funds (Invesco Variable Insurance Funds), hereafter referred to as the Fund) as of December 31, 2017, the related statement of operations for the year ended December 31, 2017, the statement of changes in net assets for each of the two years in the period ended December 31, 2017, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2017 (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2017 and the financial highlights for each of the five years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Funds management. Our responsibility is to express an opinion on the Funds financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2017 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, TX
February 14, 2018
We have served as the auditor of one or more of the investment companies in the Invesco/PowerShares group of investment companies since at least 1995. We have not determined the specific year we began serving as such auditor.
Invesco V.I. Technology Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period July 1, 2017 through December 31, 2017.
The actual and hypothetical expenses in the examples below do not represent the effect of any fees or other expenses assessed in connection with a variable product; if they did, the expenses shown would be higher while the ending account values shown would be lower.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled Actual Expenses Paid During Period to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Funds actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs. Therefore, the hypothetical information is useful in comparing ongoing costs, and will not help you determine the relative total costs of owning different funds.
Class | Beginning Account Value (07/01/17) |
ACTUAL | HYPOTHETICAL (5% annual return before expenses) |
Annualized Expense Ratio |
||||||||||||||||||||
Ending Account Value (12/31/17)1 |
Expenses Paid During Period2 |
Ending Account Value (12/31/17) |
Expenses Period2 |
|||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 1,102.90 | $ | 5.57 | $ | 1,019.91 | $ | 5.35 | 1.05 | % | ||||||||||||
Series II | 1,000.00 | 1,101.30 | 6.89 | 1,018.65 | 6.61 | 1.30 |
1 | The actual ending account value is based on the actual total return of the Fund for the period July 1, 2017 through December 31, 2017, after actual expenses and will differ from the hypothetical ending account value which is based on the Funds expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Funds annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half year. |
Invesco V.I. Technology Fund
Tax Information
Form 1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific states requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended December 31, 2017:
Federal and State Income Tax |
||||
Long-Term Capital Gain Distributions |
$ | 6,102,722 | ||
Corporate Dividends Received Deduction* |
0.00 | % | ||
U.S. Treasury Obligations* |
0.00 | % |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Funds fiscal year. |
Invesco V.I. Technology Fund
Trustees and Officers
The address of each trustee and officer is AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Trust), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trusts organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 1960 Trustee |
2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business
Formerly: Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US), Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) |
158 | None | ||||
Philip A. Taylor2 1954 Trustee and Senior Vice President |
2006 | Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco Aim Management Group, Inc.) (financial services holding company); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.) (registered transfer agent); Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company); Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management).
Formerly: Co-Chairman, Co-President and Co-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chief Executive Officer and President, Van Kampen Exchange Corp; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurers Series Trust (Invesco Treasurers Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurers Series Trust (Invesco Treasurers Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) (registered broker dealer); Manager, Invesco PowerShares Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco Aim Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurers Series Trust (Invesco Treasurers Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. |
158 | None |
1 | Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser. |
2 | Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser. |
Invesco V.I. Technology Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Independent Trustees | ||||||||
Bruce L. Crockett 1944 Trustee and Chair |
1993 | Chairman, Crockett Technologies Associates (technology consulting company)
Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute: Member of the Audit Committee, Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council |
158 | Director and Chairman of the Audit Committee, ALPS (Attorneys Liability Protection Society) (insurance company); Director and Member of the Audit Committee and Compensation Committee, Ferroglobe PLC (metallurgical company) | ||||
David C. Arch 1945 Trustee |
2010 | Chairman of Blistex Inc. (consumer health care products manufacturer); Member, World Presidents Organization | 158 | Board member of the Illinois Manufacturers Association | ||||
Jack M. Fields 1952 Trustee |
1997 | Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Chairman, Discovery Learning Alliance (non-profit)
Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff) (human resources provider); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives |
158 | None | ||||
Cynthia Hostetler 1962 Trustee |
2017 | Non-Executive Director and Trustee of a number of public and private business corporations
Formerly: Head of Investment Funds and Private Equity, Overseas Private Investment Corporation; President, First Manhattan Bancorporation, Inc.; Attorney, Simpson Thacher & Bartlett LLP |
158 | Vulcan Materials Company (construction materials company); Trilinc Global Impact Fund; Aberdeen Investment Funds (4 portfolios); Artio Global Investment LLC (mutual fund complex); Edgen Group, Inc. (specialized energy and infrastructure products distributor) | ||||
Eli Jones 1961 Trustee |
2016 | Professor and Dean, Mays Business School Texas A&M University
Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University; Director, Arvest Bank |
158 | Insperity, Inc. (formerly known as Administaff) (human resources provider) | ||||
Prema Mathai-Davis 1950 Trustee |
1998 | Retired. | 158 | None | ||||
Teresa M. Ressel 1962 Trustee |
2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Chief Financial Officer, Olayan America, The Olayan Group (international investor/commercial/industrial); Chief Executive Officer, UBS Securities LLC; Group Chief Operating Officer, Americas, UBS AG; Assistant Secretary for Management & Budget and CFO, US Department of the Treasury |
158 | Atlantic Power Corporation (power generation company); ON Semiconductor Corp. (semiconductor supplier) | ||||
Ann Barnett Stern 1957 Trustee |
2017 | President and Chief Executive Officer, Houston Endowment Inc. (private philanthropic institution)
Formerly: Executive Vice President and General Counsel, Texas Childrens Hospital; Attorney, Beck, Redden and Secrest, LLP; Business Law Instructor, University of St. Thomas; Attorney, Andrews & Kurth LLP |
158 | Federal Reserve Bank of Dallas | ||||
Raymond Stickel, Jr. 1944 Trustee |
2005 | Retired.
Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios); Partner, Deloitte & Touche |
158 | None | ||||
Robert C. Troccoli 1949 Trustee |
2016 | Adjunct Professor, University of Denver Daniels College of Business
Formerly: Senior Partner, KPMG LLP |
158 | None | ||||
Christopher L. Wilson 1957 Trustee |
2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Managing Partner, CT2, LLC (investing and consulting firm); President/Chief Executive Officer, Columbia Funds, Bank of America Corporation; President/Chief Executive Officer, CDC IXIS Asset Management Services, Inc.; Principal & Director of Operations, Scudder Funds, Scudder, Stevens & Clark, Inc.; Assistant Vice President, Fidelity Investments |
158 | TD Asset Management USA Inc. (mutual fund complex) (22 portfolios); ISO New England, Inc. (non-profit organization managing regional electricity market) |
Invesco V.I. Technology Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers | ||||||||
Sheri Morris 1964 President, Principal Executive Officer and Treasurer |
1999 | President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco Aim Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; and Treasurer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust and PowerShares Actively Managed Exchange-Traded Fund Trust |
N/A | N/A | ||||
Russell C. Burk 1958 Senior Vice President and Senior Officer |
2005 | Senior Vice President and Senior Officer, The Invesco Funds | N/A | N/A | ||||
John M. Zerr 1962 Senior Vice President, Chief Legal Officer and Secretary |
2006 | Director, Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Managing Director, Invesco PowerShares Capital Management LLC; Director, Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust; Manager and Secretary, Invesco Indexing LLC
Formerly: Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser); Vice President and Secretary, PBHG Funds (an investment company) and PBHG Insurance Series Fund (an investment company); Chief Operating Officer, General Counsel and Secretary, Old Mutual Investment Partners (a broker-dealer); General Counsel and Secretary, Old Mutual Fund Services (an administrator) and Old Mutual Shareholder Services (a shareholder servicing center); Executive Vice President, General Counsel and Secretary, Old Mutual Capital, Inc. (an investment adviser); and Vice President and Secretary, Old Mutual Advisors Funds (an investment company) |
N/A | N/A | ||||
Gregory G. McGreevey 1962 Senior Vice President |
2012 | Senior Managing Director, Invesco Ltd.; Director, Chairman, President, and Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President, Invesco Management Group, Inc.; Director, Invesco Mortgage Capital, Inc. and Invesco Senior Secured Management, Inc.; and Senior Vice President, The Invesco Funds
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A | ||||
Kelli Gallegos 1970 Vice President, Principal Financial Officer and Assistant Treasurer |
2008 | Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A |
Invesco V.I. Technology Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers(continued) | ||||||||
Tracy Sullivan 1962 Vice President, Chief Tax Officer and Assistant Treasurer |
2008 | Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A | ||||
Crissie M. Wisdom 1969 Anti-Money Laundering Compliance Officer |
2013 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., Invesco Management Group, Inc., The Invesco Funds, and PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp. |
N/A | N/A | ||||
Robert R. Leveille 1969 Chief Compliance Officer |
2016 | Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds
Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds |
N/A | N/A |
The Statement of Additional Information of the Trust includes additional information about the Funds Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Funds Statement of Additional Information for information on the Funds sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 |
Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Auditors PricewaterhouseCoopers LLP 1000 Louisiana Street, Suite 5800 Houston, TX 77002-5678 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2005 Market Street, Suite 2600 Philadelphia, PA 19103-7018 |
Counsel to the Independent Trustees Goodwin Procter LLP 901 New York Avenue, N.W. Washington, D.C. 20001 |
Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
Invesco V.I. Technology Fund
| ||||
Annual Report to Shareholders
|
December 31, 2017 | |||
| ||||
Invesco V.I. Value Opportunities Fund
|
The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Funds semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The Funds Form N-Q filings are available on the SEC website, sec.gov. Copies of the Funds Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling 202 551 8090 or 800 732 0330, or by electronic request at the following email address: publicinfo@sec.gov. The SEC file numbers for the Fund are 811-07452 and 033-57340. The Funds most recent portfolio holdings, as filed on Form N-Q, have also been made available to insurance companies issuing variable annuity contracts and variable life insurance policies (variable products) that invest in the Fund. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at 800 959 4246 or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/ proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd.s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd.
This report must be accompanied or preceded by a currently effective Fund prospectus and variable product prospectus, which contain more complete information, including sales charges and expenses. Investors should read each carefully before investing.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE | ||
Invesco Distributors, Inc. VK-VIVOPP-AR-1 02072018 1206 |
Managements Discussion of Fund Performance
Invesco V.I. Value Opportunities Fund
Invesco V.I. Value Opportunities Fund
Your Funds Long-Term Performance
Results of a $10,000 Investment Oldest Share Class(es)
Fund and index data from 12/31/07
1 | Source: FactSet Research Systems Inc. |
2 | Source: Lipper Inc. |
Past performance cannot guarantee
comparable future results.
Invesco V.I. Value Opportunities Fund
Invesco V.I. Value Opportunities Funds investment objective is long-term growth of capital.
∎ | Unless otherwise stated, information presented in this report is as of December 31, 2017, and is based on total net assets. |
∎ | Unless otherwise noted, all data provided by Invesco. |
Invesco V.I. Value Opportunities Fund
Invesco V.I. Value Opportunities Fund
Schedule of Investments(a)
December 31, 2017
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Value Opportunities Fund
Notes to Schedule of Investments:
(a) | Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poors. |
(b) | Non-income producing security. |
(c) | The money market fund and the Fund are affiliated by having the same investment adviser. The rate shown is the 7-day SEC standardized yield as of December 31, 2017. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Value Opportunities Fund
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
Invesco V.I. Value Opportunities Fund
Statement of Changes in Net Assets
For the years ended December 31, 2017 and 2016
2017 | 2016 | |||||||
Operations: |
||||||||
Net investment income |
$ | 281,297 | $ | 416,610 | ||||
Net realized gain (loss) |
11,542,936 | (1,597,460 | ) | |||||
Change in net unrealized appreciation |
8,200,593 | 22,968,571 | ||||||
Net increase in net assets resulting from operations |
20,024,826 | 21,787,721 | ||||||
Distributions to shareholders from net investment income: |
||||||||
Series I |
(326,616 | ) | (313,905 | ) | ||||
Series ll |
(5,339 | ) | (39,335 | ) | ||||
Total distributions from net investment income |
(331,955 | ) | (353,240 | ) | ||||
Distributions to shareholders from net realized gains: |
||||||||
Series l |
| (23,395,971 | ) | |||||
Series ll |
| (15,462,579 | ) | |||||
Total distributions from net realized gains |
| (38,858,550 | ) | |||||
Share transactionsnet: |
||||||||
Series l |
(11,866,628 | ) | 12,374,483 | |||||
Series ll |
(25,426,253 | ) | 6,433,390 | |||||
Net increase (decrease) in net assets resulting from share transactions |
(37,292,881 | ) | 18,807,873 | |||||
Net increase (decrease) in net assets |
(17,600,010 | ) | 1,383,804 | |||||
Net assets: |
||||||||
Beginning of year |
140,159,982 | 138,776,178 | ||||||
End of year (includes undistributed net investment income of $134,447 and $186,627, respectively) |
$ | 122,559,972 | $ | 140,159,982 |
Notes to Financial Statements
December 31, 2017
NOTE 1Significant Accounting Policies
Invesco V.I. Value Opportunities Fund (the Fund) is a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Trust). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end series management investment company consisting of twenty-four separate portfolios, (each constituting a Fund). The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each Fund or class will be voted on exclusively by the shareholders of such Fund or class. Current Securities and Exchange Commission (SEC) guidance, however, requires participating insurance companies offering separate accounts to vote shares proportionally in accordance with the instructions of the contract owners whose investments are funded by shares of each Fund or class.
The Funds investment objective is long-term growth of capital.
The Fund currently offers two classes of shares, Series I and Series II, both of which are offered to insurance company separate accounts funding variable annuity contracts and variable life insurance policies (variable products).
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 946, Financial Services Investment Companies.
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.
A. | Security Valuations Securities, including restricted securities, are valued according to the following policy. |
A security listed or traded on an exchange (except convertible securities) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and asked prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and asked prices. For purposes of determining net asset value (NAV) per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (NYSE).
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end-of-day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
Invesco V.I. Value Opportunities Fund
Debt obligations (including convertible securities) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual trading characteristics and other market data. Pricing services generally value debt obligations assuming orderly transactions of institutional round lot size, but a fund may hold or transact in the same securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Foreign securities (including foreign exchange contracts) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that the investment adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees.
Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trusts officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/asked quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a securitys fair value.
The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain Fund investments.
Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuers assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
B. | Securities Transactions and Investment Income Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any) is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. |
The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Funds net asset value and, accordingly, they reduce the Funds total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and the Statement of Changes in Net Assets, or the net investment income per share and the ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. | Country Determination For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuers securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. |
D. | Distributions Distributions from net investment income and net realized capital gain, if any, are generally declared and paid to separate accounts of participating insurance companies annually and recorded on the ex-dividend date. |
E. | Federal Income Taxes The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the Internal Revenue Code), necessary to qualify as a regulated investment company and to distribute substantially all of the Funds |
Invesco V.I. Value Opportunities Fund
taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. |
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Funds uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
The Fund files tax returns in the U.S. Federal jurisdiction and certain other jurisdictions. Generally, the Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
F. | Expenses Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets. |
G. | Accounting Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Fund monitors for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print. |
H. | Indemnifications Under the Trusts organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts, including the Funds servicing agreements, that contain a variety of indemnification clauses. The Funds maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote. |
I. | Foreign Currency Translations Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Funds books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates. |
The Fund may invest in foreign securities, which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests and are shown in the Statement of Operations.
J. | Forward Foreign Currency Contracts The Fund may engage in foreign currency transactions either on a spot (i.e. for prompt delivery and settlement) basis, or through forward foreign currency contracts, to manage or minimize currency or exchange rate risk. |
The Fund may also enter into forward foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to lock in the U.S. dollar price of that security, or the Fund may also enter into forward foreign currency contracts that do not provide for physical settlement of the two currencies, but instead are settled by a single cash payment calculated as the difference between the agreed upon exchange rate and the spot rate at settlement based upon an agreed upon notional amount (non-deliverable forwards). The Fund will set aside liquid assets in an amount equal to the daily mark-to-market obligation for forward foreign currency contracts.
A forward foreign currency contract is an obligation between two parties (Counterparties) to purchase or sell a specific currency for an agreed-upon price at a future date. The use of forward foreign currency contracts does not eliminate fluctuations in the price of the underlying securities the Fund owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statement of Operations. The primary risks associated with forward foreign currency contracts include failure of the Counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statement of Assets and Liabilities.
Invesco V.I. Value Opportunities Fund
NOTE 2Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the Adviser or Invesco). Under the terms of the investment advisory agreement, the Fund accrues daily and pays monthly an advisory fee to the Adviser based on the annual rate of the Funds average daily net assets as follows:
Average Daily Net Assets | Rate | |||||||
First $250 million |
0 | .695% | ||||||
Next $250 million |
0 | .67% | ||||||
Next $500 million |
0 | .645% | ||||||
Next $1.5 billion |
0 | .62% | ||||||
Next $2.5 billion |
0 | .595% | ||||||
Next $2.5 billion |
0 | .57% | ||||||
Next $2.5 billion |
0 | .545% | ||||||
Over $10 billion |
0 | .52% |
For the year ended December 31, 2017, the effective advisory fees incurred by the Fund was 0.695%.
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. and separate sub-advisory agreements with Invesco PowerShares Capital Management LLC and Invesco Asset Management (India) Private Limited (collectively, the Affiliated Sub-Advisers) the Adviser, not the Fund, will pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Fund based on the percentage of assets allocated to such Affiliated Sub-Adviser(s).
The Adviser has contractually agreed, through at least June 30, 2018, to waive advisory fees and/or reimburse expenses of all shares to the extent necessary to limit total annual fund operating expenses after fee waiver and/or expense reimbursement (excluding certain items discussed below) of Series I shares to 2.00% and Series II shares to 2.25% of average daily net assets (the expense limits). In determining the Advisers obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the total annual fund operating expenses after fee waiver and/or expense reimbursement to exceed the numbers reflected above: (1) interest; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including litigation expenses; and (5) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Unless Invesco continues the fee waiver agreement, it will terminate on June 30, 2018. During its term, the fee waiver agreement cannot be terminated or amended to increase expense limits or reduce the advisory fee waiver without approval of the Board of Trustees. The Adviser did not waive fees and/or reimburse expenses during the period under these expense limits.
Further, the Adviser has contractually agreed, through at least June 30, 2019, to waive the advisory fee payable by the Fund in an amount equal to 100% of the net advisory fees the Adviser receives from the affiliated money market funds on investments by the Fund of uninvested cash (excluding investments of cash collateral from securities lending) in such affiliated money market funds.
For the year ended December 31, 2017, the Adviser waived advisory fees of $3,717.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Fund has agreed to pay Invesco a fee for costs incurred in providing accounting services and fund administrative services to the Fund and to reimburse Invesco for fees paid to insurance companies that have agreed to provide certain administrative services to the Fund. These administrative services provided by the insurance companies may include, among other things: maintenance of master accounts with the Fund; tracking, recording and transmitting net purchase and redemption orders for Fund shares; maintaining and preserving records related to the purchase, redemption and other account activity of variable product owners; distributing copies of Fund documents such as prospectuses, proxy materials and periodic reports, to variable product owners, and responding to inquiries from variable product owners about the Fund. Pursuant to such agreement, for the year ended December 31, 2017, Invesco was paid $50,000 for accounting and fund administrative services and was reimbursed $196,951 for fees paid to insurance companies.
The Trust has entered into a transfer agency and service agreement with Invesco Investment Services, Inc. (IIS) pursuant to which the Fund has agreed to pay IIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IIS for certain expenses incurred by IIS in the course of providing such services. For the year ended December 31, 2017, expenses incurred under the agreement are shown in the Statement of Operations as Transfer agent fees.
The Trust has entered into a master distribution agreement with Invesco Distributors, Inc. (IDI) to serve as the distributor for the Fund. The Trust has adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the Funds Series II shares (the Plan). The Fund, pursuant to the Plan, pays IDI compensation at the annual rate of 0.25% of the Funds average daily net assets of Series II shares. The fees are accrued daily and paid monthly. Of the Plan payments, up to 0.25% of the average daily net assets of the Series II shares may be paid to insurance companies who furnish continuing personal shareholder services to customers who purchase and own Series II shares of the Fund. For the year ended December 31, 2017, expenses incurred under the Plan are detailed in the Statement of Operations as Distribution fees.
For the year ended December 31, 2017, the Fund incurred $4,643 in brokerage commissions with Invesco Capital Markets, Inc., an affiliate of the Adviser and IDI, for portfolio transactions executed on behalf of the Fund.
Certain officers and trustees of the Trust are officers and directors of the Adviser, IIS and/or IDI.
Invesco V.I. Value Opportunities Fund
NOTE 3Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investments assigned level:
Level 1 | Prices are determined using quoted prices in an active market for identical assets. |
Level 2 | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Level 3 | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Funds own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
As of December 31, 2017, all of the securities in this Fund were valued based on Level 1 inputs (see the Schedule of Investments for security categories). The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
The Funds policy is to recognize transfers in and out of the valuation levels as of the end of the reporting period. During the year ended December 31, 2017, there were no material transfers between valuation levels.
NOTE 4Trustees and Officers Fees and Benefits
Trustees and Officers Fees and Benefits include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and Trustees and Officers Fees and Benefits also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various Invesco Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees were eligible to participate in a retirement plan that provided for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. Trustees and Officers Fees and Benefits include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
NOTE 5Cash Balances
The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with State Street Bank and Trust Company, the custodian bank. Such balances, if any at period-end, are shown in the Statement of Assets and Liabilities under the payable caption Amount due custodian. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (1) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (2) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco, not to exceed the contractually agreed upon rate.
Invesco V.I. Value Opportunities Fund
NOTE 6Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended December 31, 2017 and 2016:
2017 | 2016 | |||||||
Ordinary income |
$ | 331,955 | $ | 615,315 | ||||
Long-term capital gain |
| 38,596,475 | ||||||
Total distributions |
$ | 331,955 | $ | 39,211,790 |
Tax Components of Net Assets at Period-End:
2017 | ||||
Undistributed ordinary income |
$ | 1,025,352 | ||
Undistributed long-term gain |
9,348,002 | |||
Net unrealized appreciation investments |
28,381,920 | |||
Net unrealized appreciation foreign currencies |
798 | |||
Temporary book/tax differences |
(108,757 | ) | ||
Shares of beneficial interest |
83,912,657 | |||
Total net assets |
$ | 122,559,972 |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Funds net unrealized appreciation difference is attributable primarily to wash sales.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Funds temporary book/tax differences are the result of the trustee deferral of compensation and retirement plan benefits.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund does not have a capital loss carryforward as of December 31, 2017.
NOTE 7Investment Transactions
The aggregate amount of investment securities (other than short-term securities, U.S. Treasury obligations and money market funds, if any) purchased and sold by the Fund during the year ended December 31, 2017 was $35,500,933 and $70,184,048, respectively. Cost of investments, including any derivatives, on a tax basis includes the adjustments for financial reporting purposes as of the most recently completed federal income tax reporting period-end.
Unrealized Appreciation (Depreciation) of Investments on a Tax Basis | ||||
Aggregate unrealized appreciation of investments |
$ | 34,738,733 | ||
Aggregate unrealized (depreciation) of investments |
(6,356,813 | ) | ||
Net unrealized appreciation of investments |
$ | 28,381,920 |
Cost of investments for tax purposes is $94,217,641.
NOTE 8Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of foreign currency transactions and fair fund settlement, on December 31, 2017, undistributed net investment income was decreased by $1,522 and undistributed net realized gain was increased by $1,522. This reclassification had no effect on the net assets of the Fund.
Invesco V.I. Value Opportunities Fund
NOTE 9Share Information
Summary of Share Activity | ||||||||||||||||
Years ended December 31, | ||||||||||||||||
2017(a) | 2016 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Sold: |
||||||||||||||||
Series I |
691,703 | $ | 4,815,992 | 639,701 | $ | 4,362,558 | ||||||||||
Series II |
249,911 | 1,718,280 | 159,359 | 1,120,628 | ||||||||||||
Issued as reinvestment of dividends: |
||||||||||||||||
Series I |
46,527 | 326,616 | 4,109,164 | 23,709,875 | ||||||||||||
Series II |
762 | 5,339 | 2,691,304 | 15,501,915 | ||||||||||||
Reacquired: |
||||||||||||||||
Series I |
(2,465,512 | ) | (17,009,236 | ) | (2,235,453 | ) | (15,697,950 | ) | ||||||||
Series II |
(4,012,341 | ) | (27,149,872 | ) | (1,457,745 | ) | (10,189,153 | ) | ||||||||
Net increase (decrease) in share activity |
(5,488,950 | ) | $ | (37,292,881 | ) | 3,906,330 | $ | 18,807,873 |
(a) | There are entities that are record owners of more than 5% of the outstanding shares of the Fund and in the aggregate own 61% of the outstanding shares of the Fund. The Fund and the Funds principal underwriter or adviser, are parties to participation agreements with these entities whereby these entities sell units of interest in separate accounts funding variable products that are invested in the Fund. The Fund, Invesco and/or Invesco affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, Invesco and/or Invesco affiliates including but not limited to services such as, securities brokerage, third party record keeping and account servicing and administrative services. The Fund has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially. |
NOTE 10Financial Highlights
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
Net asset value, beginning of period |
Net investment income(a) |
Net gains (losses) on securities (both realized and unrealized) |
Total from investment operations |
Dividends from net investment income |
Distributions from net realized gains |
Total distributions |
Net asset value, end of period |
Total return(b) |
Net assets, end of period (000s omitted) |
Ratio of net assets |
Ratio of expenses to average net assets without fee waivers and/or expenses absorbed |
Ratio of net investment income to average net assets |
Portfolio turnover(c) |
|||||||||||||||||||||||||||||||||||||||||||
Series I |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/17 |
$ | 6.48 | $ | 0.02 | $ | 1.11 | (d) | $ | 1.13 | $ | (0.03 | ) | $ | | $ | (0.03 | ) | $ | 7.58 | 17.44 | %(d) | $ | 87,232 | 0.98 | %(e) | 0.98 | %(e) | 0.30 | %(e) | 28 | % | |||||||||||||||||||||||||
Year ended 12/31/16 |
7.82 | 0.03 | 1.10 | 1.13 | (0.03 | ) | (2.44 | ) | (2.47 | ) | 6.48 | 18.34 | 85,722 | 1.01 | 1.02 | 0.43 | 36 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 |
9.84 | 0.05 | (1.09 | ) | (1.04 | ) | (0.26 | ) | (0.72 | ) | (0.98 | ) | 7.82 | (10.40 | ) | 83,889 | 1.04 | 1.04 | 0.51 | 82 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 |
9.36 | 0.18 | (f) | 0.44 | 0.62 | (0.14 | ) | | (0.14 | ) | 9.84 | 6.62 | 110,865 | 1.03 | 1.04 | 1.87 | (f) | 15 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 |
7.10 | 0.10 | 2.28 | 2.38 | (0.12 | ) | | (0.12 | ) | 9.36 | 33.75 | 130,146 | 1.01 | 1.02 | 1.24 | 17 | ||||||||||||||||||||||||||||||||||||||||
Series II |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended 12/31/17 |
6.45 | 0.00 | 1.11 | (d) | 1.11 | 0.00 | | 0.00 | 7.56 | 17.23 | (d) | 35,328 | 1.23 | (e) | 1.23 | (e) | 0.05 | (e) | 28 | |||||||||||||||||||||||||||||||||||||
Year ended 12/31/16 |
7.79 | 0.01 | 1.10 | 1.11 | (0.01 | ) | (2.44 | ) | (2.45 | ) | 6.45 | 17.92 | 54,438 | 1.26 | 1.27 | 0.18 | 36 | |||||||||||||||||||||||||||||||||||||||
Year ended 12/31/15 |
9.79 | 0.02 | (1.08 | ) | (1.06 | ) | (0.22 | ) | (0.72 | ) | (0.94 | ) | 7.79 | (10.65 | ) | 54,887 | 1.29 | 1.29 | 0.26 | 82 | ||||||||||||||||||||||||||||||||||||
Year ended 12/31/14 |
9.31 | 0.15 | (f) | 0.44 | 0.59 | (0.11 | ) | | (0.11 | ) | 9.79 | 6.39 | 80,217 | 1.28 | 1.29 | 1.62 | (f) | 15 | ||||||||||||||||||||||||||||||||||||||
Year ended 12/31/13 |
7.07 | 0.08 | 2.26 | 2.34 | (0.10 | ) | | (0.10 | ) | 9.31 | 33.27 | 103,800 | 1.26 | 1.27 | 0.99 | 17 |
(a) | Calculated using average shares outstanding. |
(b) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year, if applicable, and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns. |
(c) | Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year, if applicable. |
(d) | Includes litigation proceeds received during the period. Had these litigation proceeds not been received, Net gains (losses) on securities (both realized and unrealized) per share would have been $1.09 and $1.09. Total returns would have been lower. |
(e) | Ratios are based on average daily net assets (000s omitted) of $85,019 and $47,038 for Series I and Series II shares, respectively. |
(f) | Net Investment income per share and the ratio of net investment income to average net assets include significant dividends received during the year ended December 31, 2014. Net Investment income per share and the ratio of net investment income to average net assets excluding the significant dividends are $0.12 and 1.23% and $0.09 and 0.98% for Series I and Series II, respectively. |
Invesco V.I. Value Opportunities Fund
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
and Shareholders of Invesco V.I. Value Opportunities Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Invesco V.I. Value Opportunities Fund (one of the funds constituting AIM Variable Insurance Funds (Invesco Variable Insurance Funds), hereafter referred to as the Fund) as of December 31, 2017, the related statement of operations for the year ended December 31, 2017, the statement of changes in net assets for each of the two years in the period ended December 31, 2017, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2017 (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2017, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2017 and the financial highlights for each of the five years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Funds management. Our responsibility is to express an opinion on the Funds financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2017 by correspondence with the custodian and transfer agent. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, TX
February 14, 2018
We have served as the auditor of one or more of the investment companies in the Invesco/PowerShares group of investment companies since at least 1995. We have not determined the specific year we began serving as auditor.
Invesco V.I. Value Opportunities Fund
Calculating your ongoing Fund expenses
Example
As a shareholder of the Fund, you incur ongoing costs, including management fees; distribution and/or service fees (12b-1); and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period July 1, 2017 through December 31, 2017.
The actual and hypothetical expenses in the examples below do not represent the effect of any fees or other expenses assessed in connection with a variable product; if they did, the expenses shown would be higher while the ending account values shown would be lower.
Actual expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled Actual Expenses Paid During Period to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Funds actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds actual return.
The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs. Therefore, the hypothetical information is useful in comparing ongoing costs, and will not help you determine the relative total costs of owning different funds.
Class | Beginning Account Value (07/01/17) |
ACTUAL | HYPOTHETICAL (5% annual return before expenses) |
Annualized Ratio |
||||||||||||||||||||
Ending Account Value (12/31/17)1 |
Expenses Paid During Period2 |
Ending Account Value (12/31/17) |
Expenses Paid During Period2 |
|||||||||||||||||||||
Series I | $ | 1,000.00 | $ | 1,102.90 | $ | 5.19 | $ | 1,020.27 | $ | 4.99 | 0.98 | % | ||||||||||||
Series II | 1,000.00 | 1,100.60 | 6.51 | 1,019.00 | 6.26 | 1.23 |
1 | The actual ending account value is based on the actual total return of the Fund for the period July 1, 2017 through December 31, 2017, after actual expenses and will differ from the hypothetical ending account value which is based on the Funds expense ratio and a hypothetical annual return of 5% before expenses. |
2 | Expenses are equal to the Funds annualized expense ratio as indicated above multiplied by the average account value over the period, multiplied by 184/365 to reflect the most recent fiscal half year. |
Invesco V.I. Value Opportunities Fund
Tax Information
Form 1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific states requirement.
The Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended December 31, 2017:
Federal and State Income Tax |
||||
Corporate Dividends Received Deduction* |
100 | % | ||
U.S. Treasury Obligations* |
0 | % |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Funds fiscal year. |
Invesco V.I. Value Opportunities Fund
Trustees and Officers
The address of each trustee and officer is AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Trust), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trusts organizational documents. Each officer serves for a one year term or until their successors are elected and qualified. Column two below includes length of time served with predecessor entities, if any.
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Interested Persons | ||||||||
Martin L. Flanagan1 1960 Trustee |
2007 | Executive Director, Chief Executive Officer and President, Invesco Ltd. (ultimate parent of Invesco and a global investment management firm); Trustee, The Invesco Funds; Vice Chair, Investment Company Institute; and Member of Executive Board, SMU Cox School of Business
Formerly: Advisor to the Board, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.); Chairman and Chief Executive Officer, Invesco Advisers, Inc. (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Holding Company (US), Inc. (formerly IVZ Inc.) (holding company), Invesco Group Services, Inc. (service provider) and Invesco North American Holdings, Inc. (holding company); Director, Chief Executive Officer and President, Invesco Holding Company Limited (parent of Invesco and a global investment management firm); Director, Invesco Ltd.; Chairman, Investment Company Institute and President, Co-Chief Executive Officer, Co-President, Chief Operating Officer and Chief Financial Officer, Franklin Resources, Inc. (global investment management organization) |
158 | None | ||||
Philip A. Taylor2 1954 Trustee and Senior Vice President |
2006 | Head of the Americas and Senior Managing Director, Invesco Ltd.; Director, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chairman, Chief Executive Officer and President, Invesco Management Group, Inc. (formerly known as Invesco Aim Management Group, Inc.) (financial services holding company); Director and Chairman, Invesco Investment Services, Inc. (formerly known as Invesco Aim Investment Services, Inc.) (registered transfer agent); Chief Executive Officer, Invesco Corporate Class Inc. (corporate mutual fund company); Director, Chairman and Chief Executive Officer, Invesco Canada Ltd. (formerly known as Invesco Trimark Ltd./Invesco Trimark Ltèe) (registered investment adviser and registered transfer agent); Trustee and Senior Vice President, The Invesco Funds; Director, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management).
Formerly: Co-Chairman, Co-President and Co-Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Director, Chief Executive Officer and President, Van Kampen Exchange Corp; President and Principal Executive Officer, The Invesco Funds (other than AIM Treasurers Series Trust (Invesco Treasurers Series Trust), Short-Term Investments Trust and Invesco Management Trust); Executive Vice President, The Invesco Funds (AIM Treasurers Series Trust (Invesco Treasurers Series Trust), Short-Term Investments Trust and Invesco Management Trust only); Director and President, INVESCO Funds Group, Inc. (registered investment adviser and registered transfer agent); Director and Chairman, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.) (registered broker dealer); Director, President and Chairman, Invesco Inc. (holding company), Invesco Canada Holdings Inc. (holding company), Trimark Investments Ltd./Placements Trimark Ltèe and Invesco Financial Services Ltd/Services Financiers Invesco Ltèe; Chief Executive Officer, Invesco Canada Fund Inc. (corporate mutual fund company); Director and Chairman, Van Kampen Investor Services Inc.; Director, Chief Executive Officer and President, 1371 Preferred Inc. (holding company) and Van Kampen Investments Inc.; Director and President, AIM GP Canada Inc. (general partner for limited partnerships) and Van Kampen Advisors, Inc.; Director and Chief Executive Officer, Invesco Trimark Dealer Inc. (registered broker dealer); Director, Invesco Distributors, Inc. (formerly known as Invesco Aim Distributors, Inc.) (registered broker dealer); Manager, Invesco PowerShares Capital Management LLC; Director, Chief Executive Officer and President, Invesco Advisers, Inc.; Director, Chairman, Chief Executive Officer and President, Invesco Aim Capital Management, Inc.; President, Invesco Trimark Dealer Inc. and Invesco Trimark Ltd./Invesco Trimark Ltèe; Director and President, AIM Trimark Corporate Class Inc. and AIM Trimark Canada Fund Inc.; Senior Managing Director, Invesco Holding Company Limited; Director and Chairman, Fund Management Company (former registered broker dealer); President and Principal Executive Officer, The Invesco Funds (AIM Treasurers Series Trust (Invesco Treasurers Series Trust), and Short-Term Investments Trust only); President, AIM Trimark Global Fund Inc. and AIM Trimark Canada Fund Inc. |
158 | None |
1 | Mr. Flanagan is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer of the Adviser to the Trust, and an officer and a director of Invesco Ltd., ultimate parent of the Adviser. |
2 | Mr. Taylor is considered an interested person (within the meaning of Section 2(a)(19) of the 1940 Act) of the Trust because he is an officer and a director of the Adviser. |
Invesco V.I. Value Opportunities Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Independent Trustees | ||||||||
Bruce L. Crockett 1944 Trustee and Chair |
1993 | Chairman, Crockett Technologies Associates (technology consulting company)
Formerly: Director, Captaris (unified messaging provider); Director, President and Chief Executive Officer, COMSAT Corporation; Chairman, Board of Governors of INTELSAT (international communications company); ACE Limited (insurance company); Independent Directors Council and Investment Company Institute: Member of the Audit Committee, Investment Company Institute; Member of the Executive Committee and Chair of the Governance Committee, Independent Directors Council |
158 | Director and Chairman of the Audit Committee, ALPS (Attorneys Liability Protection Society) (insurance company); Director and Member of the Audit Committee and Compensation Committee, Ferroglobe PLC (metallurgical company) | ||||
David C. Arch 1945 Trustee |
2010 | Chairman of Blistex Inc. (consumer health care products manufacturer); Member, World Presidents Organization | 158 | Board member of the Illinois Manufacturers Association | ||||
Jack M. Fields 1952 Trustee |
1997 | Chief Executive Officer, Twenty First Century Group, Inc. (government affairs company); and Chairman, Discovery Learning Alliance (non-profit)
Formerly: Owner and Chief Executive Officer, Dos Angeles Ranch L.P. (cattle, hunting, corporate entertainment); Director, Insperity, Inc. (formerly known as Administaff) (human resources provider); Chief Executive Officer, Texana Timber LP (sustainable forestry company); Director of Cross Timbers Quail Research Ranch (non-profit); and member of the U.S. House of Representatives |
158 | None | ||||
Cynthia Hostetler 1962 Trustee |
2017 | Non-Executive Director and Trustee of a number of public and private business corporations
Formerly: Head of Investment Funds and Private Equity, Overseas Private Investment Corporation; President, First Manhattan Bancorporation, Inc.; Attorney, Simpson Thacher & Bartlett LLP |
158 | Vulcan Materials Company (construction materials company); Trilinc Global Impact Fund; Aberdeen Investment Funds (4 portfolios); Artio Global Investment LLC (mutual fund complex); Edgen Group, Inc. (specialized energy and infrastructure products distributor) | ||||
Eli Jones 1961 Trustee |
2016 | Professor and Dean, Mays Business School Texas A&M University
Formerly: Professor and Dean, Walton College of Business, University of Arkansas and E.J. Ourso College of Business, Louisiana State University; Director, Arvest Bank |
158 | Insperity, Inc. (formerly known as Administaff) (human resources provider) | ||||
Prema Mathai-Davis 1950 Trustee |
1998 | Retired. | 158 | None | ||||
Teresa M. Ressel 1962 Trustee |
2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Chief Financial Officer, Olayan America, The Olayan Group (international investor/commercial/industrial); Chief Executive Officer, UBS Securities LLC; Group Chief Operating Officer, Americas, UBS AG; Assistant Secretary for Management & Budget and CFO, US Department of the Treasury |
158 | Atlantic Power Corporation (power generation company); ON Semiconductor Corp. (semiconductor supplier) | ||||
Ann Barnett Stern 1957 Trustee |
2017 | President and Chief Executive Officer, Houston Endowment Inc. (private philanthropic institution)
Formerly: Executive Vice President and General Counsel, Texas Childrens Hospital; Attorney, Beck, Redden and Secrest, LLP; Business Law Instructor, University of St. Thomas; Attorney, Andrews & Kurth LLP |
158 | Federal Reserve Bank of Dallas | ||||
Raymond Stickel, Jr. 1944 Trustee |
2005 | Retired.
Formerly: Director, Mainstay VP Series Funds, Inc. (25 portfolios); Partner, Deloitte & Touche |
158 | None | ||||
Robert C. Troccoli 1949 Trustee |
2016 | Adjunct Professor, University of Denver Daniels College of Business
Formerly: Senior Partner, KPMG LLP |
158 | None | ||||
Christopher L. Wilson 1957 Trustee |
2017 | Non-executive director and trustee of a number of public and private business corporations
Formerly: Managing Partner, CT2, LLC (investing and consulting firm); President/Chief Executive Officer, Columbia Funds, Bank of America Corporation; President/Chief Executive Officer, CDC IXIS Asset Management Services, Inc.; Principal & Director of Operations, Scudder Funds, Scudder, Stevens & Clark, Inc.; Assistant Vice President, Fidelity Investments |
158 | TD Asset Management USA Inc. (mutual fund complex) (22 portfolios); ISO New England, Inc. (non-profit organization managing regional electricity market) |
Invesco V.I. Value Opportunities Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers | ||||||||
Sheri Morris 1964 President, Principal Executive Officer and Treasurer |
1999 | President, Principal Executive Officer and Treasurer, The Invesco Funds; Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); and Vice President, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Vice President and Principal Financial Officer, The Invesco Funds; Vice President, Invesco Aim Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management, Inc.; and Treasurer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust and PowerShares Actively Managed Exchange-Traded Fund Trust |
N/A | N/A | ||||
Russell C. Burk 1958 Senior Vice President and Senior Officer |
2005 | Senior Vice President and Senior Officer, The Invesco Funds | N/A | N/A | ||||
John M. Zerr 1962 Senior Vice President, Chief Legal Officer and Secretary |
2006 | Director, Senior Vice President, Secretary and General Counsel, Invesco Management Group, Inc. (formerly known as Invesco AIM Management Group, Inc.); Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President and Secretary, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Vice President and Secretary, Invesco Investment Services, Inc. (formerly known as Invesco AIM Investment Services, Inc.) Senior Vice President, Chief Legal Officer and Secretary, The Invesco Funds; Managing Director, Invesco PowerShares Capital Management LLC; Director, Secretary and General Counsel, Invesco Investment Advisers LLC (formerly known as Van Kampen Asset Management); Secretary and General Counsel, Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.) and Chief Legal Officer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust; Manager and Secretary, Invesco Indexing LLC
Formerly: Director, Secretary, General Counsel and Senior Vice President, Van Kampen Exchange Corp.; Director, Vice President and Secretary, IVZ Distributors, Inc. (formerly known as INVESCO Distributors, Inc.); Director and Vice President, INVESCO Funds Group, Inc.; Director and Vice President, Van Kampen Advisors Inc.; Director, Vice President, Secretary and General Counsel, Van Kampen Investor Services Inc.; Director, Invesco Distributors, Inc. (formerly known as Invesco AIM Distributors, Inc.); Director, Senior Vice President, General Counsel and Secretary, Invesco AIM Advisers, Inc. and Van Kampen Investments Inc.; Director, Vice President and Secretary, Fund Management Company; Director, Senior Vice President, Secretary, General Counsel and Vice President, Invesco AIM Capital Management, Inc.; Chief Operating Officer and General Counsel, Liberty Ridge Capital, Inc. (an investment adviser); Vice President and Secretary, PBHG Funds (an investment company) and PBHG Insurance Series Fund (an investment company); Chief Operating Officer, General Counsel and Secretary, Old Mutual Investment Partners (a broker-dealer); General Counsel and Secretary, Old Mutual Fund Services (an administrator) and Old Mutual Shareholder Services (a shareholder servicing center); Executive Vice President, General Counsel and Secretary, Old Mutual Capital, Inc. (an investment adviser); and Vice President and Secretary, Old Mutual Advisors Funds (an investment company) |
N/A | N/A | ||||
Gregory G. McGreevey 1962 Senior Vice President |
2012 | Senior Managing Director, Invesco Ltd.; Director, Chairman, President, and Chief Executive Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser); Senior Vice President, Invesco Management Group, Inc.; Director, Invesco Mortgage Capital, Inc. and Invesco Senior Secured Management, Inc.; and Senior Vice President, The Invesco Funds
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A | ||||
Kelli Gallegos 1970 Vice President, Principal Financial Officer and Assistant Treasurer |
2008 | Vice President, Principal Financial Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A |
Invesco V.I. Value Opportunities Fund
Trustees and Officers(continued)
Name, Year of Birth and Position(s) Held with the Trust |
Trustee and/ or Officer Since |
Principal Occupation(s) During Past 5 Years |
Number of Funds in Fund Complex Overseen by Trustee |
Other Directorship(s) Held by Trustee During Past 5 Years | ||||
Other Officers(continued) | ||||||||
Tracy Sullivan 1962 Vice President, Chief Tax Officer and Assistant Treasurer |
2008 | Vice President, Chief Tax Officer and Assistant Treasurer, The Invesco Funds; Assistant Treasurer, Invesco PowerShares Capital Management LLC, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust
Formerly: Assistant Vice President, The Invesco Funds |
N/A | N/A | ||||
Crissie M. Wisdom 1969 Anti-Money Laundering Compliance Officer |
2013 | Anti-Money Laundering Compliance Officer, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser), Invesco Capital Markets, Inc. (formerly known as Van Kampen Funds Inc.), Invesco Distributors, Inc., Invesco Investment Services, Inc., Invesco Management Group, Inc., The Invesco Funds, and PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust and PowerShares Exchange-Traded Self-Indexed Fund Trust; Anti-Money Laundering Compliance Officer and Bank Secrecy Act Officer, INVESCO National Trust Company and Invesco Trust Company; and Fraud Prevention Manager and Controls and Risk Analysis Manager for Invesco Investment Services, Inc.
Formerly: Anti-Money Laundering Compliance Officer, Van Kampen Exchange Corp. |
N/A | N/A | ||||
Robert R. Leveille 1969 Chief Compliance Officer |
2016 | Chief Compliance Officer, Invesco Advisers, Inc. (registered investment adviser); and Chief Compliance Officer, The Invesco Funds
Formerly: Chief Compliance Officer, Putnam Investments and the Putnam Funds |
N/A | N/A |
The Statement of Additional Information of the Trust includes additional information about the Funds Trustees and is available upon request, without charge, by calling 1.800.959.4246. Please refer to the Funds Statement of Additional Information for information on the Funds sub-advisers.
Office of the Fund 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Investment Adviser Invesco Advisers, Inc. 1555 Peachtree Street, N.E. Atlanta, GA 30309 |
Distributor Invesco Distributors, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Auditors PricewaterhouseCoopers LLP 1000 Louisiana Street, Suite 5800 Houston, TX 77002-5678 | |||
Counsel to the Fund Stradley Ronon Stevens & Young, LLP 2005 Market Street, Suite 2600 Philadelphia, PA 19103-7018 |
Counsel to the Independent Trustees Goodwin Procter LLP 901 New York Avenue, N.W. Washington, D.C. 20001 |
Transfer Agent Invesco Investment Services, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046-1173 |
Custodian State Street Bank and Trust Company 225 Franklin Street Boston, MA 02110-2801 |
Invesco V.I. Value Opportunities Fund
ITEM 2. | CODE OF ETHICS. |
There were no amendments to the Code of Ethics (the Code) that applies to the Registrants Principal Executive Officer (PEO) and Principal Financial Officer (PFO) during the period covered by the report. The Registrant did not grant any waivers, including implicit waivers, from any provisions of the Code to the PEO or PFO during the period covered by this report.
ITEM 3. | AUDIT COMMITTEE FINANCIAL EXPERT. |
The Board of Trustees has determined that the Registrant has at least one audit committee financial expert serving on its Audit Committee. The Audit Committee financial expert is Raymond Stickel, Jr. Mr. Stickel is independent within the meaning of that term as used in Form N-CSR.
ITEM 4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES. |
PricewaterhouseCoopers LLP informed the Trust that it has identified an issue related to its independence under Rule 2-01(c)(1)(ii)(A) of Regulation S-X (referred to as the Loan Rule). The Loan Rule prohibits accounting firms, such as PricewaterhouseCoopers LLP, from being deemed independent if they have certain financial relationships with their audit clients or certain affiliates of those clients. The Trust is required under various securities laws to have its financial statements audited by an independent accounting firm.
The Loan Rule specifically provides that an accounting firm would not be independent if it or certain affiliates and covered persons receives a loan from a lender that is a record or beneficial owner of more than ten percent of an audit clients equity securities (referred to as a more than ten percent owner). For purposes of the Loan Rule, audit clients include the Funds as well as all registered investment companies advised by the Adviser and its affiliates, including other subsidiaries of the Advisers parent company, Invesco Ltd. (collectively, the Invesco Fund Complex). PricewaterhouseCoopers LLP informed the Trust it and certain affiliates and covered persons have relationships with lenders who hold, as record owner, more than ten percent of the shares of certain funds within the Invesco Fund Complex, which may implicate the Loan Rule.
On June 20, 2016, the SEC Staff issued a no-action letter to another mutual fund complex (see Fidelity Management & Research Company et al., No-Action Letter) related to the audit independence issue described above. In that letter, the SEC confirmed that it would not recommend enforcement action against a fund that relied on audit services performed by an audit firm that was not in compliance with the Loan Rule in certain specified circumstances. In connection with prior independence determinations, PricewaterhouseCoopers LLP communicated, as contemplated by the no-action letter, that it believes that it remains objective and impartial and that a reasonable investor possessing all the facts would conclude that PricewaterhouseCoopers LLP is able to exhibit the requisite objectivity and impartiality to report on the Funds financial statements as the independent registered public accounting firm. PricewaterhouseCoopers LLP also represented that it has complied with PCAOB Rule 3526(b)(1) and (2), which are conditions to the Funds relying on the no action letter, and affirmed that it is an independent accountant within the meaning of PCAOB Rule 3520. Therefore, the Adviser, the Funds and PricewaterhouseCoopers LLP concluded that PricewaterhouseCoopers LLP could continue as the Funds independent registered public accounting firm. The Invesco Fund Complex relied upon the no-action letter in reaching this conclusion.
If in the future the independence of PricewaterhouseCoopers LLP is called into question under the Loan Rule by circumstances that are not addressed in the SECs no-action letter, the Funds will need to take other action in order for the Funds filings with the SEC containing financial statements to be deemed compliant with applicable securities laws. Such additional actions could result in additional costs, impair the ability of the Funds to issue new shares or have other material adverse effects on the Funds. The SEC no-action relief was initially set to expire 18 months from issuance but has been extended by the SEC without an expiration date, except that the no-action letter will be withdrawn upon the effectiveness of any amendments to the Loan Rule designed to address the concerns expressed in the letter.
(a) to (d)
Fees Billed by PWC Related to the Registrant
PWC billed the Registrant aggregate fees for services rendered to the Registrant for the last two fiscal years as follows:
Fees Billed for Services Rendered to the Registrant for fiscal year end |
Fees Billed for Services Rendered to the Registrant for fiscal year end |
|||||||
2017 | 2016 | |||||||
Audit Fees |
$ | 592,375 | $ | 569,575 | ||||
Audit-Related Fees |
$ | 0 | $ | 0 | ||||
Tax Fees(1) |
$ | 149,984 | $ | 146,702 | ||||
All Other Fees |
$ | 0 | $ | 0 | ||||
|
|
|
|
|||||
Total Fees |
$ | 742,359 | $ | 716,277 |
(g) PWC billed the Registrant aggregate non-audit fees of $149,984 for the fiscal year ended 2017, and $146,702 for the fiscal year ended 2016, for non-audit services rendered to the Registrant.
(1) | Tax fees for the fiscal year end December 31, 2017 includes fees billed for reviewing tax returns and/or services related to tax compliance. Tax fees for fiscal year end December 31, 2016 includes fees billed for reviewing tax returns and/or services related to tax compliance. |
Fees Billed by PWC Related to Invesco and Invesco Affiliates
PWC billed Invesco Advisers, Inc. (Invesco), the Registrants adviser, and any entity controlling, controlled by or under common control with Invesco that provides ongoing services to the Registrant (Invesco Affiliates) aggregate fees for pre-approved non-audit services rendered to Invesco and Invesco Affiliates for the last two fiscal years as follows:
Fees Billed for Non-Audit Services Rendered to Invesco and Invesco Affiliates for fiscal year end 2017 That Were Required to be Pre- Approved by the Registrants Audit Committee |
Fees Billed for Non-Audit Services Rendered to Invesco and Invesco Affiliates for fiscal year end 2016 That Were Required to be Pre- Approved by the Registrants Audit Committee |
|||||||
Audit-Related Fees |
$ | 662,000 | $ | 635,000 | ||||
Tax Fees |
$ | 0 | $ | 0 | ||||
All Other Fees |
$ | 1,006,000 | $ | 2,432,000 | ||||
|
|
|
|
|||||
Total Fees(1) |
$ | 1,668,000 | $ | 3,067,000 |
(1) | Audit-Related fees for the year end 2017 include fees billed related to reviewing controls at a service organization. Audit-Related fees for the year end 2016 include fees billed related to reviewing controls at a service organization. |
All other fees for the year end 2017 include fees billed related to the assessments for certain of the companys risk management tools, current state analysis against regulatory requirements and identification of structural and organizational alternatives, informed by industry practices, for certain of the companys administrative activities and functions. All other fees for the year end 2016 include fees billed related to the identification of structural and organizational alternatives, informed by industry practices, for certain of the companys administrative activities and functions.
(e)(2) There were no amounts that were pre-approved by the Audit Committee pursuant to the de minimus exception under Rule 2-01 of Regulation S-X.
(f) Not applicable.
(g) Including the fees for services not required to be pre-approved by the registrants audit committee, PWC billed Invesco and Invesco Affiliates aggregate non-audit fees of $4,496,000 for the fiscal year ended December 31, 2017, and $5,763,000 for the fiscal year ended December 31, 2016, for non-audit services rendered to Invesco and Invesco Affiliates.
PWC provided audit services to the Investment Company complex of approximately $23 million.
(h) The Audit Committee also has considered whether the provision of non-audit services that were rendered to Invesco and Invesco Affiliates that were not required to be pre-approved pursuant to SEC regulations, if any, is compatible with maintaining PWCs independence.
(e)(1)
PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES
POLICIES AND PROCEDURES
As adopted by the Audit Committees
of the Invesco Funds (the Funds)
Last Amended May 4, 2016
I. | Statement of Principles |
The Audit Committees (the Audit Committee) of the Boards of Trustees of the Funds (the Board) have adopted these policies and procedures (the Procedures) with respect to the pre-approval of audit and non-audit services to be provided by the Funds independent auditor (the Auditor) to the Funds, and to the Funds investment adviser(s) and any entity controlling, controlled by, or under common control with the investment adviser(s) that provides ongoing services to the Funds (collectively, Service Affiliates).
Under Section 202 of the Sarbanes-Oxley Act of 2002, all audit and non-audit services provided to the Funds by the Auditor must be preapproved by the Audit Committee. Rule 2-01 of Regulation S-X requires that the Audit Committee also pre-approve a Service Affiliates engagement of the Auditor for non-audit services if the engagement relates directly to the operations and financial reporting of the Funds (a Service Affiliates Covered Engagement).
These Procedures set forth the procedures and the conditions pursuant to which the Audit Committee may pre-approve audit and non-audit services for the Funds and a Service Affiliates Covered Engagement pursuant to rules and regulations of the Securities and Exchange Commission (SEC) and other organizations and regulatory bodies applicable to the Funds (Applicable Rules).1 They address both general pre-approvals without consideration of specific case-by-case services (general pre-approvals) and pre-approvals on a case-by-case basis (specific pre-approvals). Any services requiring pre-approval that are not within the scope of general pre-approvals hereunder are subject to specific pre-approval. These Procedures also address the delegation by the Audit Committee of pre-approval authority to the Audit Committee Chair or Vice Chair.
II. | Pre-Approval of Fund Audit Services |
The annual Fund audit services engagement, including terms and fees, is subject to specific pre-approval by the Audit Committee. Audit services include the annual financial statement audit and other procedures required to be performed by an independent auditor to be able to form an opinion on the Funds financial statements. The Audit Committee will receive, review and consider sufficient information concerning a proposed Fund audit engagement to make a reasonable evaluation of the Auditors qualifications and independence. The Audit Committee will oversee the Fund audit services engagement as necessary, including approving any changes in terms, audit scope, conditions and fees.
In addition to approving the Fund audit services engagement at least annually and specifically approving any changes, the Audit Committee may generally or specifically pre-approve engagements for other audit services, which are those services that only an independent auditor reasonably can provide. Other audit services may include services associated with SEC registration statements, periodic reports and other documents filed with the SEC.
III. | General and Specific Pre-Approval of Non-Audit Fund Services |
1 | Applicable Rules include, for example, New York Stock Exchange (NYSE) rules applicable to closed-end funds managed by Invesco and listed on NYSE. |
The Audit Committee will consider, at least annually, the list of General Pre-Approved Non-Audit Services which list may be terminated or modified at any time by the Audit Committee. To inform the Audit Committees review and approval of General Pre-Approved Non-Audit Services, the Funds Treasurer (or his or her designee) and Auditor shall provide such information regarding independence or other matters as the Audit Committee may request.
Any services or fee ranges that are not within the scope of General Pre-Approved Non-Audit Services have not received general pre-approval and require specific pre-approval. Each request for specific pre-approval by the Audit Committee for services to be provided by the Auditor to the Funds must be submitted to the Audit Committee by the Funds Treasurer (or his or her designee) and must include detailed information about the services to be provided, the fees or fee ranges to be charged, and other relevant information sufficient to allow the Audit Committee to consider whether to pre-approve such engagement, including evaluating whether the provision of such services will impair the independence of the Auditor and is otherwise consistent with Applicable Rules.
IV. | Non-Audit Service Types |
The Audit Committee may provide either general or specific pre-approval of audit-related, tax or other services, each as described in more detail below.
a. | Audit-Related Services |
Audit-related services are assurance and related services that are reasonably related to the performance of the audit or review of the Funds financial statements or that are traditionally performed by an independent auditor. Audit-related services include, among others, accounting consultations related to accounting, financial reporting or disclosure matters not classified as Audit services; assistance with understanding and implementing new accounting and financial reporting guidance from rulemaking authorities; services related to mergers, acquisitions or dispositions; compliance with ratings agency requirements and interfund lending activities; and assistance with internal control reporting requirements.
b. | Tax Services |
Tax services include, but are not limited to, the review and signing of the Funds federal tax returns, the review of required distributions by the Funds and consultations regarding tax matters such as the tax treatment of new investments or the impact of new regulations. The Audit Committee will not approve proposed services of the Auditor which the Audit Committee believes are to be provided in connection with a service or transaction initially recommended by the Auditor, the sole business purpose of which may be tax avoidance and the tax treatment of which may not be supported in the Internal Revenue Code and related regulations. The Audit Committee will consult with the Funds Treasurer (or his or her designee) and may consult with outside counsel or advisers as necessary to ensure the consistency of tax services rendered by the Auditor with the foregoing policy. The Auditor shall not represent any Fund or any Service Affiliate before a tax court, district court or federal court of claims.
Each request to provide tax services under either the general or specific pre-approval of the Audit Committee will include a description from the Auditor in writing of (i) the scope of the service, the fee structure for the engagement, and any side letter or other amendment to the engagement letter, or any other agreement (whether oral, written, or otherwise) between the Auditor and the Funds, relating to the service; and (ii) any compensation arrangement or other agreement, such as a referral agreement, a referral fee or fee-sharing arrangement, between the Auditor (or an affiliate of the Auditor) and any person (other than the Funds or Service Affiliates receiving the services) with respect to the promoting, marketing, or recommending of a transaction covered by the service. The Auditor will also discuss with
the Audit Committee the potential effects of the services on the independence of the Auditor, and document the substance of its discussion with the Audit Committee.
c. | Other Services |
The Audit Committee may pre-approve other non-audit services so long as the Audit Committee believes that the service will not impair the independence of the Auditor. Appendix I includes a list of services that the Auditor is prohibited from performing by the SEC rules. Appendix I also includes a list of services that would impair the Auditors independence unless the Audit Committee reasonably concludes that the results of the services will not be subject to audit procedures during an audit of the Funds financial statements.
V. | Pre-Approval of Service Affiliates Covered Engagements |
Rule 2-01 of Regulation S-X requires that the Audit Committee pre-approve a Service Affiliates engagement of the Auditor for non-audit services if the engagement relates directly to the operations and financial reporting of the Funds, defined above as a Service Affiliates Covered Engagement.
The Audit Committee may provide either general or specific pre-approval of any Service Affiliates Covered Engagement, including for audit-related, tax or other services, as described above, if the Audit Committee believes that the provision of the services to a Service Affiliate will not impair the independence of the Auditor with respect to the Funds. Any Service Affiliates Covered Engagements that are not within the scope of General Pre-Approved Non-Audit Services have not received general pre-approval and require specific pre-approval.
Each request for specific pre-approval by the Audit Committee of a Service Affiliates Covered Engagement must be submitted to the Audit Committee by the Funds Treasurer (or his or her designee) and must include detailed information about the services to be provided, the fees or fee ranges to be charged, a description of the current status of the pre-approval process involving other audit committees in the Invesco investment company complex (as defined in Rule 2-201 of Regulation S-X) with respect to the proposed engagement, and other relevant information sufficient to allow the Audit Committee to consider whether the provision of such services will impair the independence of the Auditor from the Funds. Additionally, the Funds Treasurer (or his or her designee) and the Auditor will provide the Audit Committee with a statement that the proposed engagement requires pre-approval by the Audit Committee, the proposed engagement, in their view, will not impair the independence of the Auditor and is consistent with Applicable Rules, and the description of the proposed engagement provided to the Audit Committee is consistent with that presented to or approved by the Invesco audit committee.
Information about all Service Affiliate engagements of the Auditor for non-audit services, whether or not subject to pre-approval by the Audit Committee, shall be provided to the Audit Committee at least quarterly, to allow the Audit Committee to consider whether the provision of such services is compatible with maintaining the Auditors independence from the Funds. The Funds Treasurer and Auditor shall provide the Audit Committee with sufficiently detailed information about the scope of services provided and the fees for such services, to ensure that the Audit Committee can adequately consider whether the provision of such services is compatible with maintaining the Auditors independence from the Funds.
VI. | Pre-Approved Fee Levels or Established Amounts |
Pre-approved fee levels or ranges for audit and non-audit services to be provided by the Auditor to the Funds, and for a Service Affiliates Covered Engagement, under general pre-approval or specific pre-approval will be set periodically by the Audit Committee. Any proposed fees exceeding 110% of the maximum pre-approved fee levels or ranges for such services or engagements will be promptly presented
to the Audit Committee and will require specific pre-approval by the Audit Committee before payment of any additional fees is made.
VII. | Delegation |
The Audit Committee may from time to time delegate specific pre-approval authority to its Chair and/or Vice Chair, so that the Chair or, in his or her absence, Vice Chair may grant specific pre-approval for audit and non-audit services by the Auditor to the Funds and/or a Service Affiliates Covered Engagement between Audit Committee meetings. Any such delegation shall be reflected in resolutions adopted by the Audit Committee and may include such limitations as to dollar amount(s) and/or scope of service(s) as the Audit Committee may choose to impose. Any such delegation shall not preclude the Chair or Vice Chair from declining, on a case by case basis, to exercise his or her delegated authority and instead convening the Audit Committee to consider and pre-approve any proposed services or engagements.
Notwithstanding the foregoing, any non-audit services to be provided to the Funds for which the fees are estimated to exceed $500,000 and any Service Affiliates Covered Engagement for which the fees are estimated to exceed $500,000 must be pre-approved by the Audit Committee and may not be delegated to the Chair or Vice Chair.
VIII. | Compliance with Procedures |
Notwithstanding anything herein to the contrary, failure to pre-approve any services or engagements that are not required to be pre-approved pursuant to the de minimis exception provided for in Rule 2-01(c)(7)(i)(C) of Regulation S-X shall not constitute a violation of these Procedures. The Audit Committee has designated the Funds Treasurer to ensure services and engagements are pre-approved in compliance with these Procedures. The Funds Treasurer will immediately report to the Chair of the Audit Committee, or the Vice Chair in his or her absence, any breach of these Procedures that comes to the attention of the Funds Treasurer or any services or engagements that are not required to be pre-approved pursuant to the de minimis exception provided for in Rule 2-01(c)(7)(i)(C) of Regulation S-X.
On at least an annual basis, the Auditor will provide the Audit Committee with a summary of all non-audit services provided to any entity in the investment company complex (as defined in section 2-01(f)(14) of Regulation S-X, including the Funds and Service Affiliates) that were not pre-approved, including the nature of services provided and the associated fees.
IX. | Amendments to Procedures |
All material amendments to these Procedures must be approved in advance by the Audit Committee. Non-material amendments to these Procedures may be made by the Legal and Compliance Departments and will be reported to the Audit Committee at the next regularly scheduled meeting of the Audit Committee.
Appendix I
Non-Audit Services That May Impair the Auditors Independence
The Auditor is not independent if, at any point during the audit and professional engagement, the Auditor provides the following non-audit services:
| Management functions; |
| Human resources; |
| Broker-dealer, investment adviser, or investment banking services; |
| Legal services; |
| Expert services unrelated to the audit; |
| Any service or product provided for a contingent fee or a commission; |
| Services related to marketing, planning, or opining in favor of the tax treatment of confidential transactions or aggressive tax position transactions, a significant purpose of which is tax avoidance; |
| Tax services for persons in financial reporting oversight roles at the Fund; and |
| Any other service that the Public Company Oversight Board determines by regulation is impermissible. |
An Auditor is not independent if, at any point during the audit and professional engagement, the Auditor provides the following non-audit services unless it is reasonable to conclude that the results of the services will not be subject to audit procedures during an audit of the Funds financial statements:
| Bookkeeping or other services related to the accounting records or financial statements of the audit client; |
| Financial information systems design and implementation; |
| Appraisal or valuation services, fairness opinions, or contribution-in-kind reports; |
| Actuarial services; and |
| Internal audit outsourcing services. |
ITEM 5. | AUDIT COMMITTEE OF LISTED REGISTRANTS. |
Not applicable.
ITEM 6. | SCHEDULE OF INVESTMENTS. |
Investments in securities of unaffiliated issuers is included as part of the reports to stockholders filed under Item 1 of this Form.
ITEM 7. | DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable.
ITEM 8. | PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT COMPANIES. |
Not applicable.
ITEM 9. | PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. |
Not applicable.
ITEM 10. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. |
None
ITEM 11. | CONTROLS AND PROCEDURES. |
(a) | As of February 14, 2018, an evaluation was performed under the supervision and with the participation of the officers of the Registrant, including the PEO and PFO, to assess the effectiveness of the Registrants disclosure controls and procedures, as that term is defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the Act), as amended. Based on that evaluation, the Registrants officers, including the PEO and PFO, concluded that, as of February 14, 2018, the Registrants disclosure controls and procedures were reasonably designed to ensure: (1) that information required to be disclosed by the Registrant on Form N-CSR is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the Securities and Exchange Commission; and (2) that material information relating to the Registrant is made known to the PEO and PFO as appropriate to allow timely decisions regarding required disclosure. |
(b) | There have been no changes in the Registrants internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrants internal control over financial reporting. |
ITEM 12. | DISCLOSURE OF SECURITIES LENDING ACTIVITIES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable.
ITEM 13. | EXHIBITS. |
13(a) (1) | Code of Ethics. | |
13(a) (2) | Certifications of principal executive officer and principal financial officer as required by Rule 30a-2(a) under the Investment Company Act of 1940. | |
13(a) (3) | Not applicable. | |
13(a) (4) | Not applicable. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
By: | /s/ Sheri Morris | |
Sheri Morris | ||
Principal Executive Officer | ||
Date: |
February 23, 2018 |
Pursuant to the requirements of the Securities and Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By: |
/s/ Sheri Morris | |
Sheri Morris | ||
Principal Executive Officer | ||
Date: |
February 23, 2018 | |
By: |
/s/ Kelli Gallegos | |
Kelli Gallegos | ||
Principal Financial Officer | ||
Date: |
February 23, 2018 |
EXHIBIT INDEX
13(a) (1) | Code of Ethics. | |
13(a) (2) | Certifications of principal executive officer and principal financial officer as required by Rule 30a-2(a) under the Investment Company Act of 1940. | |
13(a) (3) | Not applicable. | |
13(a) (4) | Not applicable. |
EXHIBIT CODE OF ETHICS
DISCLOSURE CONTROLS PROCEDURE
THE AIM FAMILY OF FUNDS CODE OF ETHICS FOR SENIOR OFFICERS
I. INTRODUCTION
The Boards of Directors/Trustees (Board) of the Invesco Funds (the Companies) have adopted this code of ethics (this Code) applicable to their Principal Executive Officer and Principal Financial and Accounting Officer (the Covered Officers) to promote:
| honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; |
| full, fair, accurate, timely and understandable disclosure in documents filed with the Securities and Exchange Commission (SEC) and in other public communications; |
| compliance with applicable governmental laws, rules and regulations; |
| the prompt internal reporting to an appropriate person or persons identified in the Code of violations of the Code; and |
| accountability for adherence to the Code. |
II. COVERED OFFICERS SHOULD ACT HONESTLY AND CANDIDLY
Each Covered Officer named in Exhibit A to this Code owes a duty to the Companies to act with integrity. Integrity requires, among other things, being honest and candid. Deceit and subordination of principle are inconsistent with integrity.
Each Covered Officer must:
| act with integrity, including being honest and candid while still maintaining the confidentiality of information where required by law or the Companies policies; |
| observe both the form and spirit of laws and governmental rules and regulations, accounting standards and policies of the Companies; |
| adhere to a high standard of business ethics; and |
| place the interests of the Companies before the Covered Officers own personal interests. |
Business practices Covered Officers should be guided by and adhere to these fiduciary standards.
III. COVERED OFFICERS SHOULD HANDLE ETHICALLY ACTUAL AND APPARENT CONFLICTS OF INTEREST
GUIDING PRINCIPLES. A conflict of interest occurs when an individuals private interest interferes with the interests of the Companies. A conflict of interest can arise when a Covered Officer takes actions or has interests that may make it difficult to perform his or her work for the Companies objectively and effectively. For example, a conflict of interest would arise if a Covered Officer, or a member of his family, receives improper personal benefits as a result of his or her position in any of the Companies. In addition, investment companies should be sensitive to situations that create apparent, but not actual, conflicts of interest. Service to the Companies should never be subordinated to personal gain and advantage.
Certain conflicts of interest covered by this Code arise out of the relationships between Covered Officers and the Companies that already are subject to conflict of interest provisions in the Investment Company Act of 1940, as amended and the Investment Advisers Act of 1940, as amended. For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the Companies because of their status as affiliated persons of the Companies. Therefore, as to the existing statutory and regulatory prohibitions on individual behavior, they will be deemed to be incorporated in this Code and therefore any material violation will also be deemed a violation of this Code. Covered Officers must in all cases comply with applicable statutes and regulations.
As to conflicts arising from, or as a result of the contractual relationship between, the Companies and the investment adviser of which the Covered Officers are also officers or employees, it is recognized by the Board that, subject to the advisers fiduciary duties to the Companies, the Covered Officers will in the normal course of their duties (whether formally for the Companies or for the adviser, or for both) be involved in establishing policies and implementing decisions which will have different effects on the adviser and the Companies. The Board recognizes that the participation of the Covered Officers in such activities is inherent in the contractual relationship between the Companies and the adviser and is consistent with the expectation of the Board of the performance by the Covered Officers of their duties as officers of the Companies. In addition, it is recognized by the Board that the Covered Officers may also be officers or employees of other investment companies advised by the same adviser and the codes which apply to senior officers of those investment companies will apply to the Covered Officers acting in those distinct capacities.
Each Covered Officer must:
| avoid conflicts of interest wherever possible; |
| handle any actual or apparent conflict of interest ethically; |
| not use his or her personal influence or personal relationships to influence investment decisions or financial reporting by an investment company whereby the Covered Officer would benefit personally to the detriment of any of the Companies; |
| not cause an investment company to take action, or fail to take action, for the personal benefit of the Covered Officer rather than the benefit of such company; |
| not use knowledge of portfolio transactions made or contemplated for an investment company to profit or cause others to profit, by the market effect of such transactions; and |
| as described in more detail below, discuss any material transaction or relationship that could reasonably be expected to give rise to a conflict of interest with the Chief Legal Officer of the Invesco Funds (the Chief Legal Officer). |
Some conflict of interest situations that should always be discussed with the Chief Legal Officer, if material, include the following:
| any outside business activity that detracts from an individuals ability to devote appropriate time and attention to his or her responsibilities with the Companies; |
| being in the position of supervising, reviewing or having any influence on the job evaluation, pay or benefit of any immediate family member; |
| any direct ownership interest in, or any consulting or employment relationship with, any of the Companies service providers, other than its investment adviser, distributor or other Invesco Ltd. affiliated entities and other than a de minimis ownership interest (for purposes of this section of the Code an ownership interest of 1% or less shall constitute a de minimis ownership interest, and an ownership interest of more than 1% creates a rebuttable presumption that there may be a material conflict of interest); and |
| a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Companies for effecting portfolio transactions or for selling or redeeming shares, other than an interest arising from the Covered Officers employment with Invesco, its subsidiaries, its parent organizations and any affiliates or subsidiaries thereof, such as compensation or equity ownership, and other than an interest arising from a de minimis ownership interest in a company with which the Companies execute portfolios transactions or a company that receives commissions or other fees related to its sales and redemptions of shares of the Companies (for purposes of this section of the Code an ownership interest of 1% or less shall constitute a de minimis ownership interest, and an ownership interest of more than 1% creates a rebuttable presumption that there may be a material conflict of interest). |
IV. DISCLOSURE
Each Covered Officer is required to be familiar, and comply, with the Companies disclosure controls and procedures so that the Companies subject reports and documents filed with the SEC comply in all material respects with the applicable federal securities laws and SEC rules. In addition, each Covered Officer having direct or supervisory authority regarding these SEC filings or the Companies other public communications should, to the extent appropriate within his area of responsibility, consult with other officers and employees of the Companies and take other appropriate steps regarding these disclosures with the goal of making full, fair, accurate, timely and understandable disclosure.
Each Covered Officer must:
| familiarize himself/herself with the disclosure requirements applicable to the Companies as well as the business and financial operations of the Companies; and |
| not knowingly misrepresent, or cause others to misrepresent, facts about the Companies to others, whether within or outside the Companies, including representations to the Companies internal auditors, independent Directors/Trustees, independent auditors, and to governmental regulators and self-regulatory organizations. |
V. COMPLIANCE
It is the Companies policy to comply in all material respects with all applicable governmental laws, rules and regulations. It is the personal responsibility of each Covered Officer to adhere to the standards and restrictions imposed by those laws, rules and regulations, including those relating to affiliated transactions, accounting and auditing matters.
VI. REPORTING AND ACCOUNTABILITY
Each Covered Officer must:
| upon receipt of the Code, sign and submit to the Chief Compliance Officer of the Companies an acknowledgement stating that he or she has received, read, and understands the Code. |
| annually thereafter submit a form to the Chief Compliance Officer of the Companies confirming that he or she has received, read and understands the Code and has complied with the requirements of the Code. |
| not retaliate against any employee or other Covered Officer for reports of potential violations that are made in good faith. |
| notify the Chief Legal Officer promptly if he becomes aware of any existing or potential violation of this Code. Failure to do so is itself a violation of this Code. |
Except as described otherwise below, the Chief Legal Officer is responsible for applying this Code to specific situations in which questions are presented to him or her and has the authority to interpret this Code in any particular situation. The Chief Legal Officer shall take all action he or she considers appropriate to investigate any actual or potential violations reported to him or her.
The Chief Legal Officer is authorized to consult, as appropriate, with the Chairman of the Audit Committees of the Board, counsel to the Companies and counsel to the independent Directors/Trustees, and is encouraged to do so.
The Chief Legal Officer is responsible for granting waivers and determining sanctions, as appropriate. In addition, approvals, interpretations, or waivers sought by the Covered Officers may also be considered by the Chairman of the Invesco Funds Audit Committees.
The Companies will follow these procedures in investigating and enforcing this Code, and in reporting on the Code:
| the Chief Legal Officer will take all appropriate action to investigate any violations reported to him or her; |
| violations and potential violations will be reported to the Chairman of the Audit Committees of the Board after such investigation; |
| if the Chairman of the Audit Committees determines that a violation has occurred, he or she will inform the Board, which will take all appropriate disciplinary or preventive action; |
| appropriate disciplinary or preventive action may include a letter of censure, suspension, dismissal or, in the event of criminal or other serious violations of law, notification to the SEC or other appropriate law enforcement authorities; |
| the Chief Legal Officer will be responsible for granting waivers, as appropriate; and |
| any changes to or waivers of this Code will, to the extent required, be disclosed on Form N-CSR as provided by SEC rules. |
VII. OTHER POLICIES AND PROCEDURES
The Companies and the Advisers and Principal Underwriters codes of ethics under Rule 17j-1 under the Investment Company Act and the Advisers more detailed policies and procedures set forth in its Compliance and Supervisory Procedures Manual are separate requirements applying to Covered Officers and others, and are not part of this Code.
VIII. AMENDMENTS
This Code may not be amended except in written form, which is specifically approved by a majority vote of the Companies Board, including a majority of independent Directors/Trustees.
IX. CONFIDENTIALITY
All reports and records prepared or maintained pursuant to this Code shall be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the members of the Companies Board, counsel to the Companies, and counsel to the independent Directors/Trustees.
EXHIBIT A
Persons Covered by this Code of Ethics:
Sheri Morris
Kelli Gallegos
THE INVESCO FUNDS
CODE OF ETHICSACKNOWLEDGEMENT
I hereby acknowledge that I am a Principal Officer of the Companies and I am aware of and subject to the Companies Code of Ethics for Principal Officers. Accordingly, I have read and understood the requirements of the Code of Ethics and I am committed to fully comply with the Code of Ethics.
I recognize my obligation to promote:
1. Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
2. Full, fair, accurate, timely, and understandable disclosure in reports and documents that the Companies file with, or submit to, the Commission and in other public communications made by the Companies; and
3. Compliance with applicable governmental laws, rules, and regulations.
Date |
Name: | |
Title: |
I, Sheri Morris, Principal Executive Officer, certify that:
1. I have reviewed this report on Form N-CSR of AIM Variable Insurance Funds (Invesco Variable Insurance Funds);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and
(d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting.
5. The registrants other certifying officer(s) and I have disclosed to the registrants auditors and the audit committee of the registrants board of trustees (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize, and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: February 23, 2018 | /s/ Sheri Morris | |
Sheri Morris, Principal Executive Officer |
I, Kelli Gallegos, Principal Financial Officer, certify that:
1. I have reviewed this report on Form N-CSR of AIM Variable Insurance Funds (Invesco Variable Insurance Funds);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3 (d) under the Investment Company Act of 1940) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and
(d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting.
5. The registrants other certifying officer(s) and I have disclosed to the registrants auditors and the audit committee of the registrants board of trustees (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize, and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: February 23, 2018 |
/s/ Kelli Gallegos | |
Kelli Gallegos, Principal Financial Officer |
CERTIFICATION OF SHAREHOLDER REPORT
In connection with the Certified Shareholder Report of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Company) on Form N-CSR for the period ended December 31, 2017, as filed with the Securities and Exchange Commission (the Report), I, Sheri Morris, Principal Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: February 23, 2018 |
/s/ Sheri Morris | |
Sheri Morris, Principal Executive Officer |
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided by the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
CERTIFICATION OF SHAREHOLDER REPORT
In connection with the Certified Shareholder Report of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Company) on Form N-CSR for the period ended December 31, 2017, as filed with the Securities and Exchange Commission (the Report), I, Kelli Gallegos, Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: February 23, 2018 |
/s/ Kelli Gallegos | |
Kelli Gallegos, Principal Financial Officer |
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided by the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
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