Invesco V.I. High Yield Fund

Transcription

1 Semiannual Report to Shareholders June 30, 2017 The Fund provides a complete list of its holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Fund s semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the lists with the Securities and Exchange Commission (SEC) on Form N-Q. The Fund s Form N-Q filings are available on the SEC website, sec.gov. Copies of the Fund s Forms N-Q may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room, including information about duplicating fee charges, by calling or , or by electronic request at the following address: publicinfo@sec.gov. The SEC file numbers for the Fund are and The Fund s most recent portfolio holdings, as filed on Form N-Q, have also been made available to insurance companies issuing variable annuity contracts and variable life insurance policies ( variable products ) that invest in the Fund. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, from our Client Services department at or at invesco.com/proxyguidelines. The information is also available on the SEC website, sec.gov. Information regarding how the Fund voted proxies related to its portfolio securities during the most recent 12-month period ended June 30 is available at invesco.com/ proxysearch. The information is also available on the SEC website, sec.gov. Invesco Advisers, Inc. is an investment adviser; it provides investment advisory services to individual and institutional clients and does not sell securities. Invesco Distributors, Inc. is the US distributor for Invesco Ltd. s retail mutual funds, exchange-traded funds and institutional money market funds. Both are wholly owned, indirect subsidiaries of Invesco Ltd. This report must be accompanied or preceded by a currently effective Fund prospectus and variable product prospectus, which contain more complete information, including sales charges and expenses. Investors should read each carefully before investing. Invesco Distributors, Inc. VIHYI-SAR

2 Fund Performance Performance summary Fund vs. Indexes Cumulative total returns, 12/31/16 to 6/30/17, excluding variable product issuer charges. If variable product issuer charges were included, returns would be lower. Series I Shares 4.07% Series II Shares 3.92 Bloomberg Barclays U.S. Aggregate Index (Broad Market Index) 2.27 Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Cap Index (Style-Specific Index) 4.92 Lipper VUF High Yield Bond Funds Classification Average (Peer Group) 4.08 Source(s): FactSet Research Systems Inc.; Lipper Inc. The Bloomberg Barclays U.S. Aggregate Index is an unmanaged index considered representative of the US investment-grade, fixed-rate bond market. The Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Cap Index is an unmanaged index considered representative of the US high-yield, fixed-rate corporate bond market. Index weights for each issuer are capped at 2%. The Lipper VUF High Yield Bond Funds Classification Average represents an average of all of the variable insurance underlying funds in the Lipper High Yield Bond Funds classification. The Fund is not managed to track the performance of any particular index, including the index(es) described here, and consequently, the performance of the Fund may deviate significantly from the performance of the index(es). A direct investment cannot be made in an index. Unless otherwise indicated, index results include reinvested dividends, and they do not reflect sales charges. Performance of the peer group, if applicable, reflects fund expenses; performance of a market index does not. Average Annual Total Returns As of 6/30/17 Series I Shares Inception (5/1/98) 4.34% 10 Years Years Year 9.47 Series II Shares Inception (3/26/02) 6.97% 10 Years Years Year 9.10 The performance of the Fund s Series I and Series II share classes will differ primarily due to different class expenses. The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Please contact your variable product issuer or financial adviser for the most recent month-end variable product performance. Performance figures reflect Fund expenses, reinvested distributions and changes in net asset value. Investment return and principal value will fluctuate so that you may have a gain or loss when you sell shares. The total annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Series I and Series II shares was 0.98% and 1.23%, respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report., a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds), is currently offered through insurance companies issuing variable products. You cannot purchase shares of the Fund directly. Performance figures given represent the Fund and are not intended to reflect actual variable product values. They do not reflect sales charges, expenses and fees assessed in connection with a variable product. Sales charges, expenses and fees, which are determined by the variable product issuers, will vary and will lower the total return. The most recent month-end performance at the Fund level, excluding variable product charges, is available at As mentioned above, for the most recent month-end performance including variable product charges, please contact your variable product issuer or financial adviser. Fund performance reflects any applicable fee waivers and/or expense reimbursements. Had the adviser not waived fees and/or reimbursed expenses currently or in the past, returns would have been lower. See current prospectus for more information.

3 Schedule of Investments (a) June 30, 2017 (Unaudited) Principal U.S. Dollar Denominated Bonds & Notes 89.97% Advertising 0.74% Lamar Media Corp., Sr. Unsec. Gtd. Global Notes, 5.75%, 02/01/2026 $1,290,000 $ 1,399,650 Aerospace & Defense 2.11% Bombardier Inc. (Canada), 6.00%, 10/15/2022 (b) 380, , %, 03/15/2025 (b) 300, ,625 KLX Inc., 5.88%, 12/01/2022 (b) 640, ,400 Moog Inc., 5.25%, 12/01/2022 (b) 442, ,890 TransDigm Inc., Sr. Unsec. Gtd. Sub. Global Notes, 6.50%, 07/15/ , , %, 05/15/2025 1,960,000 2,011,450 4,002,417 Agricultural & Farm Machinery 0.47% Titan International Inc., Sr. Sec. Gtd. First Lien Global Notes, 6.88%, 10/01/ , ,440 Air Freight & Logistics 0.14% XPO Logistics, Inc., Sr. Unsec. Gtd. Notes, 6.50%, 06/15/2022 (b) 249, ,006 Airlines 0.24% Air Canada (Canada), Sr. Unsec. Gtd. Notes, 7.75%, 04/15/2021 (b) 400, ,920 Alternative Carriers 0.72% Level 3 Financing, Inc., Sr. Unsec. Gtd. Global Notes, 5.25%, 03/15/ , , %, 05/01/ , ,050 1,356,994 Aluminum 0.92% Alcoa Nederland Holding B.V., 6.75%, 09/30/2024 (b) 932,000 1,011,639 Novelis Corp., 6.25%, 08/15/2024 (b) 696, ,670 1,743,309 Apparel Retail 1.52% Gap, Inc. (The), Sr. Unsec. Global Bonds, 5.95%, 04/12/ , ,885 Hot Topic, Inc., Sr. Sec. Gtd. First Lien Notes, 9.25%, 06/15/2021 (b) 882, ,130 L Brands, Inc., Sr. Unsec. Gtd. Global Notes, 5.63%, 02/15/2022 1,023,000 1,099, %, 07/01/ ,000 97, %, 11/01/ , ,880 2,887,833 Principal Auto Parts & Equipment 0.45% Dana Financing Luxembourg S.a.r.l., 5.75%, 04/15/2025 (b) $ 270,000 $ 280,463 Dana Inc., 5.38%, 09/15/ ,000 57, %, 12/15/ , , ,308 Automobile Manufacturers 0.00% Motors Liquidation Co., Sr. Unsec. Notes, 0.00%, 07/15/2033 (c) 1,060,000 0 Automotive Retail 0.26% Murphy Oil USA, Inc., Sr. Unsec. Gtd. Global Notes, 5.63%, 05/01/ , ,240 Broadcasting 2.89% Clear Channel Worldwide Holdings Inc., Series B, Sr. Unsec. Gtd. Global Notes, 6.50%, 11/15/ , ,555 Sr. Unsec. Gtd. Sub. Global Notes, 7.63%, 03/15/ , ,129 iheartcommunications, Inc., Sr. Sec. Gtd. First Lien Global Notes, 9.00%, 12/15/ , ,310 Netflix, Inc., Sr. Unsec. Global Notes, 5.75%, 03/01/ , ,217 Nexstar Broadcasting, Inc., Sr. Unsec. Gtd. Notes, 5.63%, 08/01/2024 (b) 540, ,425 Sirius XM Radio Inc., Sr. Unsec. Gtd. Notes, 5.38%, 04/15/2025 (b) 4,000 4, %, 07/15/2026 (b) 620, , %, 07/15/2024 (b) 668, ,090 Tribune Media Co., Sr. Unsec. Gtd. Global Notes, 5.88%, 07/15/ , ,503 5,471,184 Building Products 1.71% Allegion PLC, 5.88%, 09/15/ , ,983 BMC East, LLC, Sr. Sec. Gtd. First Lien Notes, 5.50%, 10/01/2024 (b) 649, ,827 Builders FirstSource, Inc., Sr. Unsec. Gtd. Notes, 10.75%, 08/15/2023 (b) 735, ,681 Gibraltar Industries Inc., Sr. Unsec. Gtd. Sub. Global Notes, 6.25%, 02/01/ , ,334 Standard Industries Inc., Sr. Unsec. Notes, 5.00%, 02/15/2027 (b) 515, ,012 3,239,837 Cable & Satellite 8.67% AMC Networks Inc., Sr. Unsec. Gtd. Global Notes, 5.00%, 04/01/ , ,000 See accompanying Notes to Financial Statements which are an integral part of the financial statements.

4 Principal Cable & Satellite (continued) CCO Holdings LLC/CCO Holdings Capital Corp., Sr. Unsec. Global Notes, 5.75%, 09/01/2023 $ 620,000 $ 649, %, 01/15/ ,000 42, %, 02/15/2026 (b) 1,710,000 1,838,250 CSC Holdings LLC, 6.63%, 10/15/2025 (b) 200, , %, 01/15/2023 (b) 1,755,000 2,042, %, 10/15/2025 (b) 530, ,987 DISH DBS Corp., Sr. Unsec. Gtd. Global Notes, 5.88%, 11/15/2024 1,714,000 1,833, %, 09/01/2019 1,111,000 1,223,489 Hughes Satellite Systems Corp., 7.63%, 06/15/ ,000 1,016,880 Intelsat Jackson Holdings S.A. (Luxembourg), Sr. Unsec. Gtd. Global Notes, 7.25%, 04/01/ , , %, 10/15/ , ,250 SFR Group S.A. (France), Sr. Sec. Gtd. First Lien Bonds, 6.00%, 05/15/2022 (b) 905, ,987 Sr. Sec. Gtd. First Lien Notes, 7.38%, 05/01/2026 (b) 564, ,940 Unitymedia Hessen GmbH & Co. KG/ Unitymedia NRW GmbH (Germany), Sr. Sec. Gtd. First Lien Bonds, 5.00%, 01/15/2025 (b) 885, ,250 UPCB Finance IV Ltd. (Netherlands), Sr. Sec. First Lien Notes, 5.38%, 01/15/2025 (b) 450, ,938 Virgin Media Finance PLC (United Kingdom), 6.00%, 10/15/2024 (b) 450, ,688 Virgin Media Secured Finance PLC (United Kingdom), Sr. Sec. Gtd. First Lien Notes, 5.50%, 08/15/2026 (b) 699, ,824 VTR Finance B.V. (Chile), Sr. Sec. First Lien Notes, 6.88%, 01/15/2024 (b) 590, ,612 Ziggo Bond Finance B.V. (Netherlands), 5.88%, 01/15/2025 (b) 400, ,000 Ziggo Secured Finance B.V. (Netherlands), Sr. Sec. Gtd. FIrst Lien Notes, 5.50%, 01/15/2027 (b) 400, ,000 16,434,261 Casinos & Gaming 3.13% Boyd Gaming Corp., Sr. Unsec. Gtd. Global Notes, 6.38%, 04/01/ , , %, 05/15/ ,000 1,009,325 Principal Casinos & Gaming (continued) Codere Finance 2 (Luxembourg) S.A. (Spain), Sr. Sec. Gtd. First Lien Notes, 7.63%, 11/01/2021 (b) $ 448,000 $ 447,160 MGM Resorts International, Sr. Unsec. Gtd. Notes, 4.63%, 09/01/ , , %, 03/15/ , , %, 03/15/ , ,528 Pinnacle Entertainment, Inc., 5.63%, 05/01/2024 (b) 914, ,845 Scientific Games International Inc., 10.00%, 12/01/ , ,006 Wynn Las Vegas LLC/Wynn Las Vegas Capital Corp., Sr. Unsec. Gtd. Notes, 5.25%, 05/15/2027 (b) 694, , %, 03/01/2025 (b) 385, ,175 5,933,651 Commercial Printing 0.40% Multi-Color Corp., Sr. Unsec. Gtd. Notes, 6.13%, 12/01/2022 (b) 723, ,150 Commodity Chemicals 0.26% Koppers Inc., 6.00%, 02/15/2025 (b) 460, ,050 Construction & Engineering 0.15% AECOM, 5.13%, 03/15/2027 (b) 277, ,078 Construction Machinery & Heavy Trucks 0.84% Meritor Inc., 6.25%, 02/15/ , , %, 06/15/ , ,880 Oshkosh Corp., Sr. Unsec. Gtd. Global Notes, 5.38%, 03/01/ , ,174 Terex Corp., 5.63%, 02/01/2025 (b) 456, ,820 1,585,514 Consumer Finance 1.00% Ally Financial Inc., Sr. Unsec. Global Notes, 4.63%, 03/30/ , , %, 09/30/ ,000 1,050, %, 03/15/ , ,313 1,888,825 Copper 0.48% First Quantum Minerals Ltd. (Zambia), 7.00%, 02/15/2021 (b) 880, ,400 Data Processing & Outsourced Services 1.01% First Data Corp., 7.00%, 12/01/2023 (b) 1,780,000 1,909,050 See accompanying Notes to Financial Statements which are an integral part of the financial statements.

5 Principal Diversified Banks 1.80% Bank of America Corp., Series K, Jr. Unsec. Sub. Global Notes, 8.00% (d) $ 197,000 $ 203,403 Citigroup Inc., Series R, Jr. Unsec. Sub. Global Notes, 6.13% (d) 440, ,000 Series T, Jr. Unsec. Sub. Global Notes, 6.25% (d) 664, ,040 Dresdner Funding Trust I (Germany), REGS, Jr. Unsec. Sub. Euro Notes, 8.15%, 06/30/2031 (b) 365, ,063 JPMorgan Chase & Co., Series 1, Jr. Unsec. Sub. Global Notes, 7.90% (d) 445, ,356 Royal Bank of Scotland Group PLC (The) (United Kingdom), Unsec. Sub. Global Bonds, 5.13%, 05/28/2024 1,019,000 1,071,134 3,407,996 Diversified Chemicals 0.80% Chemours Co. (The), Sr. Unsec. Gtd. Global Notes, 6.63%, 05/15/2023 1,204,000 1,285, %, 05/15/ , ,350 1,525,620 Diversified Metals & Mining 1.48% Freeport-McMoRan Inc., Sr. Unsec. Gtd. Global Notes, 5.40%, 11/14/2034 1,020, ,450 HudBay Minerals, Inc. (Canada), 7.63%, 01/15/2025 (b) 848, ,400 Teck Resources Ltd. (Canada), 4.75%, 01/15/ , , %, 10/01/ , ,517 2,813,887 Diversified Support Services 0.17% Alpine Finance Merger Sub LLC, 6.88%, 08/01/2025 (b) 54,000 55,215 Jaguar Holding Co. II/Pharmaceutical Product Development, LLC, 6.38%, 08/01/2023 (b) 250, , ,903 Electric Utilities 0.16% Southern Co. (The), Series B, Jr. Unsec. Sub. Global Notes, 5.50%, 03/15/ , ,948 Electrical Components & Equipment 0.78% EnerSys, 5.00%, 04/30/2023 (b) 798, ,940 Sensata Technologies B.V., Sr. Unsec. Gtd. Notes, 4.88%, 10/15/2023 (b) 270, , %, 10/01/2025 (b) 370, ,500 1,485,840 Principal Environmental & Facilities Services 0.22% Advanced Disposal Services, Inc., 5.63%, 11/15/2024 (b) $ 408,000 $ 422,280 Food Distributors 0.36% US Foods, Inc., 5.88%, 06/15/2024 (b) 653, ,018 Food Retail 0.87% BC ULC/ New Red Finance, Inc. (Canada), Sec. Gtd. Second Lien Notes, 6.00%, 04/01/2022 (b) 715, ,494 Ingles Markets, Inc., Sr. Unsec. Global Notes, 5.75%, 06/15/ , ,095 1,657,589 Forest Products 0.00% Sino-Forest Corp. (Hong Kong), 6.25%, 10/21/2017 (Acquired 04/01/2014; Cost $0) (b)(c)(e) 40,000 4 Gas Utilities 1.21% AmeriGas Partners, L.P./AmeriGas Finance Corp., Sr. Unsec. Global Notes, 5.63%, 05/20/ , , %, 08/20/ , ,760 Ferrellgas L.P./Ferrellgas Finance Corp., Sr. Unsec. Global Notes, 6.50%, 05/01/ , ,150 Suburban Propane Partners, L.P./ Suburban Energy Finance Corp., Sr. Unsec. Global Notes, 5.50%, 06/01/2024 1,105,000 1,105,000 2,297,560 General Merchandise Stores 0.30% Dollar Tree, Inc., Sr. Unsec. Gtd. Global Notes, 5.75%, 03/01/ , ,549 Health Care Equipment 0.67% Eagle Holding Co. II, LLC, Sr. Unsec. PIK Notes, 8.38%, 05/15/2022 (b)(f) 526, ,410 Hill-Rom Holdings, Inc., Sr. Unsec. Gtd. Notes, 5.00%, 02/15/2025 (b) 545, ,306 Teleflex Inc., 4.88%, 06/01/ , , %, 06/15/ ,000 44,828 1,262,319 Health Care Facilities 3.94% Acadia Healthcare Co., Inc., Sr. Unsec. Gtd. Global Notes, 6.50%, 03/01/ , ,750 Community Health Systems, Inc., Sr. Sec. Gtd. First Lien Global Notes, 5.13%, 08/01/ , ,031 Sr. Sec. Gtd. First Lien Notes, 6.25%, 03/31/ , , %, 02/01/ , , %, 11/15/ , ,937 See accompanying Notes to Financial Statements which are an integral part of the financial statements.

6 Principal Health Care Facilities (continued) HCA Healthcare, Inc., 6.25%, 02/15/2021 $ 94,000 $ 102,930 HCA, Inc., Sr. Sec. Gtd. First Lien Notes, 5.25%, 04/15/ , , %, 02/15/ , , %, 02/01/ , , %, 02/15/2026 1,560,000 1,688,700 HealthSouth Corp., Sr. Unsec. Gtd. Global Notes, 5.75%, 09/15/ , ,800 LifePoint Health, Inc., 5.38%, 05/01/ , , %, 12/01/ , ,325 7,475,457 Health Care Services 2.83% DaVita Inc., Sr. Unsec. Gtd. Global Notes, 5.00%, 05/01/ , ,140 MEDNAX, Inc., 5.25%, 12/01/2023 (b) 765, ,775 MPH Acquisition Holdings LLC, 7.13%, 06/01/2024 (b) 1,019,000 1,090,330 Surgery Center Holdings, Inc., 6.75%, 07/01/2025 (b) 92,000 93,725 Team Health Holdings, Inc., Sr. Unsec. Gtd. Notes, 6.38%, 02/01/2025 (b) 460, ,500 Tenet Healthcare Corp., Sec. Gtd. Second Lien Notes, 7.50%, 01/01/2022 (b) 103, ,013 Sr. Unsec. Global Notes, 6.75%, 06/15/2023 1,114,000 1,116, %, 08/01/ , , %, 04/01/ , ,512 5,373,840 Home Improvement Retail 0.45% Hillman Group Inc. (The), Sr. Unsec. Gtd. Notes, 6.38%, 07/15/2022 (b) 880, ,800 Homebuilding 2.56% Ashton Woods USA LLC/Ashton Woods Finance Co., 6.88%, 02/15/2021 (b) 749, ,789 Beazer Homes USA, Inc., Sr. Unsec. Gtd. Global Notes, 6.75%, 03/15/ , , %, 03/15/ , ,725 CalAtlantic Group Inc., Sr. Unsec. Gtd. Notes, 5.25%, 06/01/ , , %, 10/01/ , ,012 CalAtlantic Group, Inc., Sr. Unsec. Gtd. Global Notes, 8.38%, 01/15/ , ,000 Principal Homebuilding (continued) KB Home, 7.50%, 09/15/2022 $ 236,000 $ 268, %, 03/15/ , ,173 Lennar Corp., 4.88%, 12/15/ , ,438 Meritage Homes Corp., Sr. Unsec. Gtd. Global Notes, 7.15%, 04/15/ , , %, 06/01/ , ,387 Taylor Morrison Communities Inc./ Taylor Morrison Holdings II, Inc., 5.88%, 04/15/2023 (b) 498, ,727 4,844,834 Household Products 1.41% Reynolds Group Issuer Inc./LLC (New Zealand), Sr.Sec.Gtd.FirstLienGlobalNotes, 5.75%, 10/15/ , ,033 Sr. Sec. Gtd. First Lien Notes, 5.13%, 07/15/2023 (b) 450, , %, 07/15/2024 (b) 561, ,673 Spectrum Brands, Inc., Sr. Unsec. Gtd. Global Notes, 5.75%, 07/15/ , ,637 Springs Industries, Inc., Sr. Sec. Global Notes, 6.25%, 06/01/ , ,001 2,679,219 Independent Power Producers & Energy Traders 2.16% AES Corp. (The), 5.50%, 04/15/2025 2,138,000 2,250,245 Calpine Corp., Sr. Unsec. Global Notes, 5.50%, 02/01/ , ,212 Dynegy Inc., Sr. Unsec. Gtd. Global Notes, 7.38%, 11/01/ , ,863 NRG Energy, Inc., Sr. Unsec. Gtd. Global Notes, 6.25%, 05/01/ , , %, 03/15/ , , %, 01/15/ , ,312 4,091,235 Industrial Machinery 0.05% Mueller Industries, Inc., Unsec. Sub. Deb., 6.00%, 03/01/ , ,940 Integrated Oil & Gas 0.16% California Resources Corp., Sec. Gtd. Second Lien Notes, 8.00%, 12/15/2022 (b) 469, ,988 Integrated Telecommunication Services 1.91% CenturyLink, Inc., Series S, 6.45%, 06/15/ , ,125 Series Y, Sr. Unsec. Global Notes, 7.50%, 04/01/ , ,360 See accompanying Notes to Financial Statements which are an integral part of the financial statements.

7 Principal Integrated Telecommunication Services (continued) Cincinnati Bell Inc., Sr. Unsec. Gtd. Notes, 7.00%, 07/15/2024 (b) $ 429,000 $ 450,450 Frontier Communications Corp., Sr. Unsec. Global Notes, 8.50%, 04/15/ , , %, 09/15/ , , %, 09/15/ , ,394 Telecom Italia Capital S.A. (Italy), 6.38%, 11/15/ , , %, 07/18/ , ,825 3,629,166 Internet Software & Services 1.12% CyrusOne L.P./CyrusOne Finance Corp., 5.00%, 03/15/2024 (b) 166, , %, 03/15/2027 (b) 366, ,555 Equinix, Inc., 5.75%, 01/01/ , , %, 01/15/2026 1,306,000 1,430,070 2,114,102 Leisure Facilities 0.50% Cedar Fair L.P./Canada s Wonderland Co./Magnum Management Corp., 5.38%, 06/01/ , , %, 04/15/2027 (b) 200, ,750 Six Flags Entertainment Corp., 4.88%, 07/31/2024 (b) 500, , ,500 Managed Health Care 0.78% Centene Corp., 4.75%, 01/15/ , ,812 Molina Healthcare, Inc., Sr. Unsec. Gtd. Notes, 4.88%, 06/15/2025 (b) 340, ,250 WellCare Health Plans Inc., Sr. Unsec. Notes, 5.25%, 04/01/ , ,350 1,483,412 Metal & Glass Containers 0.69% Ardagh Packaging Finance PLC/Ardagh Holdings USA Inc. (Ireland), Sr. Sec. Gtd. First Lien Notes, 4.25%, 09/15/2022 (b) 227, , %, 02/15/2025 (b) 200, , %, 05/15/2024 (b) 310, ,450 Berry Global, Inc., Sec. Gtd. Second Lien Global Notes, 6.00%, 10/15/ ,000 96,300 Sec. Gtd. Second Lien Notes, 5.50%, 05/15/ , ,719 1,301,928 Principal Movies & Entertainment 0.73% AMC Entertainment Holdings, Inc., Sr. Unsec. Gtd. Sub. Global Notes, 5.75%, 06/15/2025 $ 860,000 $ 898,700 Lions Gate Entertainment Corp., 5.88%, 11/01/2024 (b) 466, ,465 1,389,165 Oil & Gas Drilling 0.84% Ensco PLC, Sr. Unsec. Global Notes, 4.50%, 10/01/ , ,700 Precision Drilling Corp. (Canada), 5.25%, 11/15/ , , %, 12/15/ , , %, 12/15/2023 (b) 94,000 93,530 Transocean Inc., Sr. Unsec. Gtd. Global Notes, 7.50%, 04/15/ , ,815 1,591,149 Oil & Gas Equipment & Services 0.83% Archrock Partners, L.P./Archrock Partners Finance Corp., Sr. Unsec. Gtd. Global Notes, 6.00%, 10/01/ , ,000 SESI, L.L.C., Sr. Unsec. Gtd. Global Notes, 6.38%, 05/01/ , , %, 12/15/ , ,857 Weatherford International Ltd., 6.50%, 08/01/ , , %, 06/15/ , ,668 1,580,555 Oil & Gas Exploration & Production 5.59% Callon Petroleum Co., Sr. Unsec. Gtd. Global Notes, 6.13%, 10/01/ , ,640 Continental Resources Inc., Sr. Unsec. Gtd. Global Notes, 3.80%, 06/01/ , ,906 Denbury Resources Inc., Sr. Unsec. Gtd. Sub. Notes, 5.50%, 05/01/ , ,495 EP Energy LLC/Everest Acquisition Finance Inc., Sr. Sec. Gtd. First Lien Notes, 8.00%, 11/29/2024 (b) 420, ,050 Gulfport Energy Corp., Sr. Unsec. Gtd. Notes, 6.00%, 10/15/2024 (b) 497, ,575 Newfield Exploration Co., Sr. Unsec. Global Notes, 5.63%, 07/01/ , ,198 Oasis Petroleum Inc., Sr. Unsec. Gtd. Global Notes, 6.88%, 01/15/ , ,978 Parsley Energy LLC/Parsley Finance Corp., 6.25%, 06/01/2024 (b) 919, ,247 See accompanying Notes to Financial Statements which are an integral part of the financial statements.

8 Principal Oil & Gas Exploration & Production (continued) QEP Resources, Inc., Sr. Unsec. Global Notes, 5.25%, 05/01/2023 $ 225,000 $ 214, %, 03/01/ , ,925 Range Resources Corp., 4.88%, 05/15/ , , %, 07/01/2022 (b) 446, ,920 Rice Energy Inc., Sr. Unsec. Gtd. Global Notes, 7.25%, 05/01/ , ,263 RSP Permian, Inc., Sr. Unsec. Gtd. Notes, 5.25%, 01/15/2025 (b) 329, ,056 SM Energy Co., Sr. Unsec. Global Notes, 6.13%, 11/15/ , , %, 09/15/ , ,138 Southwestern Energy Co., Sr. Unsec. Global Notes, 4.10%, 03/15/ , ,235 Whiting Petroleum Corp., Sr. Unsec. Gtd. Global Notes, 6.25%, 04/01/ , ,532 WildHorse Resource Development Corp., 6.88%, 02/01/2025 (b) 673, ,302 WPX Energy Inc., 5.25%, 09/15/ , ,350 10,603,580 Oil & Gas Refining & Marketing 0.08% MPLX LP, Sr. Unsec. Global Notes, 4.88%, 06/01/ , ,788 Oil & Gas Storage & Transportation 2.86% Antero Midstream Partners LP/Antero Midstream Finance Corp., Sr. Unsec. Gtd. Notes, 5.38%, 09/15/2024 (b) 207, ,693 Antero Resources Corp., Sr. Unsec. Gtd. Global Notes, 5.63%, 06/01/ , ,000 Energy Transfer Equity, L.P., Sr. Sec. First Lien Notes, 5.88%, 01/15/ , ,187 Holly Energy Partners L.P./Holly Energy Finance Corp., Sr. Unsec. Gtd. Notes, 6.00%, 08/01/2024 (b) 257, ,208 NGL Energy Partners L.P./NGL Energy Finance Corp., Sr. Unsec. Gtd. Notes, 6.13%, 03/01/2025 (b) 372, ,960 SemGroup Corp., Sr. Unsec. Gtd. Notes, 6.38%, 03/15/2025 (b) 535, ,287 Targa Resources Partners L.P./Targa Resources Partners Finance Corp., Sr. Unsec. Gtd. Global Bonds, 5.25%, 05/01/ , , %, 02/01/2025 (b) 484, ,520 Tesoro Corp., Sr. Unsec. Gtd. Global Notes, 5.13%, 04/01/ ,000 76,500 Principal Oil & Gas Storage & Transportation (continued) Tesoro Logistics L.P./Tesoro Logistics Finance Corp., 6.38%, 05/01/2024 $ 676,000 $ 733, %, 01/15/ , ,920 Williams Cos., Inc. (The), Sr. Unsec. Global Notes, 4.55%, 06/24/ , , %, 09/01/ , ,704 5,418,430 Other Diversified Financial Services 0.37% Lincoln Finance Ltd. (Netherlands), Sr. Sec. Gtd. First Lien Notes, 7.38%, 04/15/2021 (b) 492, ,860 Orchestra Borrower LLC/Orchestra Co- Issuer, Inc., Sec. Second Lien Notes, 6.75%, 06/15/2022 (b) 171, , ,845 Packaged Foods & Meats 1.36% B&G Foods, Inc., 5.25%, 04/01/ , ,085 JBS Investments GmbH (Brazil), Gtd. Notes, 7.25%, 04/03/2024 (b) 525, ,875 JBS USA Lux S.A./JBS USA Finance Inc. (Brazil), 5.75%, 06/15/2025 (b) 180, ,875 Lamb Weston Holdings, Inc., Sr. Unsec. Gtd. Notes, 4.63%, 11/01/2024 (b) 420, ,700 TreeHouse Foods, Inc., Sr. Unsec. Gtd. Notes, 6.00%, 02/15/2024 (b) 814, ,927 2,582,462 Paper Packaging 0.21% Graphic Packaging International Inc., 4.13%, 08/15/ ,000 30, %, 11/15/ , , ,463 Paper Products 1.06% Clearwater Paper Corp., Sr. Unsec. Gtd. Global Notes, 4.50%, 02/01/ , ,560 Mercer International Inc. (Canada), Sr. Unsec. Global Notes, 7.75%, 12/01/ , , %, 02/01/2024 (b) 259, ,655 P.H. Glatfelter Co., Sr. Unsec. Gtd. Global Notes, 5.38%, 10/15/ , ,965 Rayonier A.M. Products Inc., Sr. Unsec. Gtd. Notes, 5.50%, 06/01/2024 (b) 542, ,772 2,018,777 See accompanying Notes to Financial Statements which are an integral part of the financial statements.

9 Principal Pharmaceuticals 1.24% Endo DAC/Endo Finance LLC/Endo Finco Inc., 6.00%, 07/15/2023 (b) $ 240,000 $ 202,800 Valeant Pharmaceuticals International, Inc., 5.50%, 03/01/2023 (b) 388, , %, 12/01/2021 (b) 16,000 14, %, 05/15/2023 (b) 200, , %, 04/15/2025 (b) 410, , %, 08/15/2018 (b) 50,000 50, %, 10/01/2020 (b) 251, , %, 07/15/2021 (b) 1,000, ,000 2,343,837 Restaurants 0.75% Aramark Services, Inc., Sr. Unsec. Gtd. Notes, 5.00%, 04/01/2025 (b) 445, ,256 Carrols Restaurant Group, Inc., Sec. Gtd. Second Lien Global Notes, 8.00%, 05/01/ , ,713 Sec. Gtd. Second Lien Notes, 8.00%, 05/01/2022 (b) 195, ,650 KFC Holding Co. (The)/Pizza Hut Holdings LLC/Taco Bell of America LLC, 4.75%, 06/01/2027 (b) 241, ,025 1,426,644 Security & Alarm Services 0.85% ADT Corp. (The), Sr. Sec. Gtd. First Lien Global Notes, 6.25%, 10/15/ , ,812 Prime Security Services Borrower, LLC/ Prime Finance, Inc., Sec. Gtd. Second Lien Notes, 9.25%, 05/15/2023 (b) 1,230,000 1,340,700 1,613,512 Semiconductors 0.34% Micron Technology, Inc., Sr. Unsec. Global Notes, 5.50%, 02/01/ , ,535 Specialized Consumer Services 0.77% ServiceMaster Co., LLC (The), 5.13%, 11/15/2024 (b) 272, , %, 08/15/2027 1,086,000 1,172,880 1,455,420 Specialized Finance 2.41% AerCap Global Aviation Trust (Ireland), Jr. Unsec. Gtd. Sub. Notes, 6.50%, 06/15/2045 (b) 434, ,295 Aircastle Ltd., Sr. Unsec. Global Notes, 7.63%, 04/15/ , , %, 04/01/ , , %, 02/15/ , ,720 Principal Specialized Finance (continued) CIT Group Inc., Sr. Unsec. Global Notes, 5.00%, 08/01/2023 $ 956,000 $ 1,032,480 Fly Leasing Ltd. (Ireland), Sr. Unsec. Global Notes, 6.75%, 12/15/ , ,997 MSCI Inc., 5.25%, 11/15/2024 (b) 640, , %, 08/15/2025 (b) 140, ,725 4,572,717 Specialized REIT s 0.73% GLP Capital L.P./GLP Financing II, Inc., 5.38%, 04/15/ , ,169 Iron Mountain US Holdings, Inc., 5.38%, 06/01/2026 (b) 809, ,483 1,392,652 Specialty Chemicals 2.12% Ashland LLC, Sr. Unsec. Gtd. Global Notes, 4.75%, 08/15/ , ,400 Axalta Coating Systems, LLC, 4.88%, 08/15/2024 (b) 472, ,700 GCP Applied Technologies Inc., 9.50%, 02/01/2023 (b) 516, ,885 Kraton Polymers LLC/Kraton Polymers Capital Corp., 10.50%, 04/15/2023 (b) 596, ,595 PolyOne Corp., Sr. Unsec. Global Notes, 5.25%, 03/15/ , ,870 PQ Corp., Sr. Sec. Gtd. First Lien Notes, 6.75%, 11/15/2022 (b) 415, ,200 Valvoline Inc., 5.50%, 07/15/2024 (b) 388, ,250 Venator Finance S.a.r.l./Venator Materials Corp. (Luxembourg), 5.75%, 07/15/2025 (b) 215, ,225 4,013,125 Steel 0.84% ArcelorMittal (Luxembourg), Sr. Unsec. Global Notes, 7.50%, 10/15/ , ,624 Steel Dynamics, Inc., Sr. Unsec. Gtd. Global Notes, 5.00%, 12/15/ , ,575 United States Steel Corp., Sr. Unsec. Global Notes, 7.50%, 03/15/ ,000 89, %, 04/01/ , ,781 1,588,481 Systems Software 0.03% j2 Cloud Services, LLC/ j2 Cloud Co-Obligor, Inc., Sr. Unsec. Gtd. Notes, 6.00%, 07/15/2025 (b) 49,000 50,715 See accompanying Notes to Financial Statements which are an integral part of the financial statements.

10 Principal Technology Distributors 0.30% CDW LLC/CDW Finance Corp., Sr. Unsec. Gtd. Notes, 5.00%, 09/01/2025 $ 538,000 $ 560,865 Technology Hardware, Storage & Peripherals 2.09% CommScope Technologies LLC, 6.00%, 06/15/2025 (b) 1,002,000 1,077,150 Dell International LLC/EMC Corp., 7.13%, 06/15/2024 (b) 1,202,000 1,328,210 Diebold Nixdorf, Inc., Sr. Unsec. Gtd. Global Notes, 8.50%, 04/15/ , ,280 Western Digital Corp., Sr. Unsec. Gtd. Global Notes, 10.50%, 04/01/ , ,040 3,971,680 Tobacco 0.19% Alliance One International, Inc., Sr. Sec. Gtd. First Lien Notes, 8.50%, 04/15/2021 (b) 352, ,720 Trading Companies & Distributors 0.78% Herc Rentals Inc., Sec. Gtd. Second Lien Notes, 7.75%, 06/01/2024 (b) 470, ,025 United Rentals North America, Inc., 5.50%, 07/15/ ,000 43, %, 09/15/ , , %, 06/15/ , ,844 1,479,121 Trucking 1.72% Avis Budget Car Rental LLC/Avis Budget Finance Inc., 5.25%, 03/15/2025 (b) 705, ,869 Hertz Corp. (The), Sec. Gtd. Second Lien Notes, 7.63%, 06/01/2022 (b) 690, , %, 10/15/ , , %, 04/15/ , , %, 01/15/ , ,800 Kenan Advantage Group Inc. (The), 7.88%, 07/31/2023 (b) 918, ,490 3,264,784 Wireless Telecommunication Services 5.39% Altice Financing S.A. (Luxembourg), Sr. Sec. Gtd. First Lien Bonds, 7.50%, 05/15/2026 (b) 430, ,375 Sr. Sec. Gtd. First Lien Notes, 6.63%, 02/15/2023 (b) 600, ,250 Altice Luxembourg S.A. (Luxembourg), 7.63%, 02/15/2025 (b) 207, , %, 05/15/2022 (b) 700, ,500 Principal Wireless Telecommunication Services (continued) Altice US Finance I Corp., Sr. Sec. Notes, 5.50%, 05/15/2026 (b) $ 440,000 $ 463,650 SBA Communications Corp., Sr. Unsec. Global Notes, 4.88%, 07/15/ , , %, 09/01/2024 (b) 808, ,160 Sprint Corp., Sr. Unsec. Gtd. Global Notes, 7.25%, 09/15/2021 1,366,000 1,519, %, 02/15/ , , %, 09/15/2023 1,449,000 1,669,972 T-Mobile USA, Inc., Sr. Unsec. Gtd. Global Bonds, 6.50%, 01/15/ ,000 1,070, %, 03/01/ , ,377 Wind Acquisition Finance S.A. (Italy), Sr. Sec. Gtd. First Lien Notes, 6.50%, 04/30/2020 (b) 250, ,375 Sr. Sec. Gtd. First Lien Euro Notes, 6.50%, 04/30/2020 (b) 200, ,250 Sec. Gtd. Second Lien Notes, 7.38%, 04/23/2021 (b) 595, ,032 10,226,762 Total U.S. Dollar Denominated Bonds & Notes (Cost $172,608,696) 170,624,835 Shares Exchange-Traded Funds 4.01% ishares 0-5 Year High Yield Corporate Bond ETF 80,000 3,828,800 SPDR Bloomberg Barclays Short Term High Yield Bond ETF 135,000 3,775,950 Total Exchange-Traded Funds (Cost $7,607,000) 7,604,750 Principal Variable Rate Senior Loan Interests 0.59% (g) Building Products 0.48% HD Supply Waterworks Group Inc., Term Loan,, 12/22/2017 (h) $ 904, ,000 Specialty Chemicals 0.11% Kraton Polymers LLC, Term Loan, 5.23%, 01/06/ , ,755 Total Variable Rate Senior Loan Interests (Cost $1,114,504) 1,117,755 Non-U.S. Dollar Denominated Bonds & Notes 0.52% (i) Casinos & Gaming 0.19% Cirsa Funding Luxembourg S.A. (Spain), REGS, Sr. Unsec. Gtd. Euro Notes, 5.88%, 05/15/2023 (b) EUR 200, ,463 Snaitech S.p.A. (Italy), Sr. Sec. First Lien Bonds, 6.38%, 11/07/2021 (b) EUR 100, , ,102 See accompanying Notes to Financial Statements which are an integral part of the financial statements.

11 Principal Environmental & Facilities Services 0.06% Paprec Holding S.A. (France), Sr. Sec. Gtd. First Lien Bonds, 5.25%, 04/01/2022 (b) EUR 100,000 $ 120,282 Health Care Services 0.27% Synlab Unsecured Bondco PLC (United Kingdom), REGS, Sr. Unsec. Gtd. Euro Bonds, 8.25%, 07/01/2023 (b) EUR 400, ,183 Total Non-U.S. Dollar Denominated Bonds & Notes (Cost $903,714) 994,567 U.S. Treasury Bills 0.35% (j) 0.82%, 08/10/2017 (k) $ 240, , %, 08/10/2017 (k) 250, , %, 08/10/2017 (l) 180, ,838 Total U.S. Treasury Bills (Cost $669,361) 669,395 Shares Preferred Stock 0.07% Specialized Finance 0.07% CIT Group Inc., Series A, 5.80% Pfd. (Cost $120,000) 120, ,700 Shares Common Stocks & Other Equity Interests 0.00% Automobile Manufacturers 0.00% Motors Liquidation Co. GUC Trust 1 $ 9 Broadcasting 0.00% Adelphia Recovery Trust Series ACC-1 (m) 318, Adelphia Recovery Trust Series Arahova (m) 109, Diversified Support Services 0.00% ACC Claims Holdings, LLC (n) 269,616 1,011 Total Common Stocks & Other Equity Interests (Cost $143,574) 1,095 Money Market Funds 3.74% Government & Agency Portfolio, Institutional Class, 0.89% (o) 4,250,552 4,250,552 Treasury Portfolio, Institutional Class, 0.85% (o) 2,833,701 2,833,701 Total Money Market Funds (Cost $7,084,253) 7,084,253 TOTAL INVESTMENTS 99.25% (Cost $190,251,102) 188,222,350 OTHER ASSETS LESS LIABILITIES 0.75% 1,417,484 NET ASSETS % $189,639,834 Investment Abbreviations: Deb. Debentures PIK Payment in Kind Sr. Senior ETF Exchange-Traded Fund REGS Regulation S Sub. Subordinated EUR Euro REIT Real Estate Investment Trust Unsec. Unsecured Gtd. Guaranteed Sec. Secured Jr. Junior Notes to Schedule of Investments: (a) Industry and/or sector classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor s. (b) Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended (the 1933 Act ). The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The aggregate value of these securities at June 30, 2017 was $72,271,204, which represented 38.11% of the Fund s Net Assets. (c) Defaulted security. Currently, the issuer is partially or fully in default with respect to interest payments. The aggregate value of these securities at June 30, 2017 was $4, which represented less than 1% of the Fund s Net Assets. (d) Perpetual bond with no specified maturity date. (e) Acquired as part of the Sino-Forest Corp. reorganization. (f) All or a portion of this security is Payment-in-Kind. (g) (h) (i) (j) (k) (l) (m) (n) (o) Issuer Cash Rate PIK Rate Eagle Holding Co. II, LLC, Sr. Unsec PIK Notes 7.63% 8.38% 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. Senior secured corporate loans and senior secured debt securities in the Fund s portfolio generally have variable rates which adjust to a base, such as the London Inter-Bank 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. This floating rate interest will settle after June 30, 2017, at which time the interest rate will be determined. Foreign denominated security. Principal amount is denominated in the currency indicated. Security traded on a discount basis. The interest rate shown represents the discount rate at the time of purchase by the Fund. All or a portion of the value was designated as collateral to cover margin requirements for swap agreements. See Note 1N and Note 4. All or a portion of the value was pledged as collateral to cover margin requirements for futures contracts. See Note 1M. Acquired as part of the Adelphia Communications bankruptcy reorganization. Non-income producing security. 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 June 30, See accompanying Notes to Financial Statements which are an integral part of the financial statements.

12 Portfolio Composition By credit quality, based on Total Investments* as of June 30, 2017 BBB 0.8% BB 39.2 B 48.2 CCC 9.2 Not Rated 2.6 Source: Standard & Poor s. A credit rating is an assessment provided by a nationally recognized statistical rating organization (NRSRO) of the creditworthiness of an issuer with respect to debt obligations, including specific securities, money market instruments or other debts. Ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest); ratings are subject to change without notice. Non-Rated indicates the debtor was not rated, and should not be interpreted as indicating low quality. For more information on Standard and Poor s rating methodology, please visit standardandpoors.com and select Understanding Ratings under Rating Resources on the homepage. * Excluding U.S. Treasury Bills and money market fund holdings, if any. See accompanying Notes to Financial Statements which are an integral part of the financial statements.

13 Statement of Assets and Liabilities June 30, 2017 (Unaudited) Assets: Investments, at value (Cost $183,166,849) $181,138,097 Investments in affiliated money market funds, at value and cost 7,084,253 Total investments, at value (Cost $190,251,102) 188,222,350 Foreign currencies, at value (Cost $862,164) 891,260 Receivable for: Investments sold 5,998,036 Variation margin centrally cleared swap agreements 13,519 Fund shares sold 109,948 Dividends and interest 2,760,285 Investment for trustee deferred compensation and retirement plans 80,466 Other assets 31 Total assets 198,075,895 Liabilities: Payable for: Investments purchased 7,331,590 Fund shares reacquired 520,424 due custodian 322,929 Accrued fees to affiliates 122,477 Accrued trustees and officers fees and benefits 4,314 Accrued other operating expenses 30,948 Trustee deferred compensation and retirement plans 85,005 Unrealized depreciation on forward foreign currency contracts outstanding 18,374 Total liabilities 8,436,061 Net assets applicable to shares outstanding $189,639,834 Net assets consist of: Shares of beneficial interest $193,937,772 Undistributed net investment income 12,200,681 Undistributed net realized gain (loss) (14,456,220) Net unrealized appreciation (depreciation) (2,042,399) $189,639,834 Net Assets: Series I $101,088,166 Series II $ 88,551,668 Statement of Operations For the six months ended June 30, 2017 (Unaudited) Investment income: Interest (net of foreign withholding taxes of $632) $5,163,212 Dividends 20,323 Dividends from affiliates 63,112 Total investment income 5,246,647 Expenses: Advisory fees 574,247 Administrative services fees 161,796 Custodian fees 3,044 Distribution fees Series II 106,811 Transfer agent fees 8,633 Trustees and officers fees and benefits 11,702 Reports to shareholders 18,655 Professional services fees 18,974 Other 4,559 Total expenses 908,421 Less: Fees waived (13,257) Net expenses 895,164 Net investment income 4,351,483 Realized and unrealized gain (loss) from: Net realized gain (loss) from: Investment securities 1,111,311 Foreign currencies 29,019 Forward foreign currency contracts (68,219) Futures contracts (413,456) Swap agreements 69, ,473 Change in net unrealized appreciation (depreciation) of: Investment securities 2,053,210 Foreign currencies 31,284 Forward foreign currency contracts (27,038) Futures contracts 24,152 Swap agreements (25,496) 2,056,112 Net realized and unrealized gain 2,784,585 Net increase in net assets resulting from operations $7,136,068 Shares outstanding, no par value, with an unlimited number of shares authorized: Series I 17,993,422 Series II 15,895,586 Series I: Net asset value per share $ 5.62 Series II: Net asset value per share $ 5.57 See accompanying Notes to Financial Statements which are an integral part of the financial statements.

14 Statement of Changes in Net Assets For the six months ended June 30, 2017 and the year ended December 31, 2016 (Unaudited) June 30, 2017 December 31, 2016 Operations: Net investment income $ 4,351,483 $ 8,396,076 Net realized gain (loss) 728,473 (5,542,632) Change in net unrealized appreciation 2,056,112 13,733,616 Net increase in net assets resulting from operations 7,136,068 16,587,060 Distributions to shareholders from net investment income: Series I (4,133,290) Series ll (3,068,973) Total distributions from net investment income (7,202,263) Share transactions net: Series l 2,563,232 16,319,925 Series ll 2,316,386 7,485,826 Net increase in net assets resulting from share transactions 4,879,618 23,805,751 Net increase in net assets 12,015,686 33,190,548 Net assets: Beginning of period 177,624, ,433,600 End of period (includes undistributed net investment income of $12,200,681 and $7,849,198, respectively) $189,639,834 $177,624,148 Notes to Financial Statements June 30, 2017 (Unaudited) NOTE 1 Significant Accounting Policies (the Fund ) is a series portfolio of AIM Variable Insurance Funds (Invesco Variable Insurance Funds) (the Trust ). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the 1940 Act ), as an open-end series management investment company consisting of twenty-four separate portfolios, (each constituting a Fund ). The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Matters affecting each Fund or class will be voted on exclusively by the shareholders of such Fund or class. Current Securities and Exchange Commission ( SEC ) guidance, however, requires participating insurance companies offering separate accounts to vote shares proportionally in accordance with the instructions of the contract owners whose investments are funded by shares of each Fund or class. The Fund s investment objective is total return, comprised of current income and capital appreciation. The Fund currently offers two classes of shares, Series I and Series II, both of which are offered to insurance company separate accounts funding variable annuity contracts and variable life insurance policies ( variable products ). The 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. 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 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

15 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 Adviser determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards. Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and asked prices is used to value debt obligations, including corporate loans. Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust s officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ asked quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security s fair value. The Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/ or liquidity of certain Fund investments. Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer s assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments. B. Securities Transactions and Investment Income Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income (net of withholding tax, if any) is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. Bond premiums and discounts are amortized and/or accreted for financial reporting purposes. The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and as unrealized gain (loss) for investments still held. Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund s net asset value and, accordingly, they reduce the Fund s total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and the Statement of Changes in Net Assets, or the net investment income per share and the ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the investment adviser. The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class. C. Country Determination For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer s securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America, unless otherwise noted. D. Distributions Distributions from net investment income and net realized capital gain, if any, are generally declared and paid to separate accounts of participating insurance companies annually and recorded on the ex-dividend date. E. Federal Income Taxes The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the Internal Revenue Code ), necessary to qualify as a regulated investment company and to distribute substantially all of the Fund s